The Claimant, Grove Developments Ltd, issued a Part 8 claim seeking declaratory relief in respect of two issues of construction of a contract against the defendant, Balfour Beatty Regional Construction Ltd.

The defendant issued interim payment application 24 (IA 24) despite no agreement having been made as to the mechanism for making future payments beyond the 23 interim payment applications provided for under the Contract.

The claimant argued that the defendant had no contractual right to issue IA 24, so the payment notice regime was irrelevant.

The defendant started an adjudication where the adjudicator issued his decision, finding that the claimant should pay to the defendant a further £2 million. The claimant started Part 8 proceedings in order to “finally determine key questions of construction and law which arose in the adjudication and render any decision by the adjudicator that was adverse” to the claimant.

Mr Justice Stuart-Smith held that the defendant “had no contractual right to make or be paid in respect of IA24 (or any subsequent application)”.

Firstly, such a term could not be implied into the building contract, despite the defendant’s contention that it was commercially sensible to do so, on the basis that the possibility of further interim payments in the event of a delay (howsoever caused) was open to the contractor to negotiate at the outset in first agreeing to the payment schedule. 

Mr Justice Stuart-Smith quoted Arnold v Britton & Ors [2015] UKSC 36 saying that

"… the Court should treat what it considers to be 'business common sense' with caution, because what appears to be business common sense may depend upon the standpoint from which the question is asked. Where words are capable of more than one meaning, the Court should consider the implications of the rival constructions as part of the interpretive process and is entitled to prefer a construction which is consistent with business common sense and to reject one that is not. But the Court should not strain to find ambiguity where none exists."

Secondly, the payment procedure set out in the Scheme for Construction Contracts did not apply for future payments because the parties had agreed the payments were to be made pursuant to the agreed schedule. In the correspondence between the parties with regard to “the terms on which such interim payments were to be made”, a revision to those terms was a "pre-condition to a concluded and binding agreement".

The practical effect of this case is that it emphasises the importance contractors should place on ensuring they agree a payment schedule that adequately considers all scenarios, including those that are both within and beyond their control, and furthermore the impact that a deviation from this may have upon their cash flow.