Amey LG Limited (Amey) were the main contractor in relation to a project concerning the refurbishment of roads around Sheffield. Aggregate Industries UK Limited (Aggregate) were hired by Amey to complete the surfacing and civil engineering works for this project. Once the works were completed Aggregate had failed to submit their final statement. Amey claimed that this was in breach of the subcontract. Subsequently, they sought a declaration of when the statement should be provided. On the other hand, Aggregate claimed that the subcontract only insisted on a final payment being made within a ‘reasonable time’. 

Clause 17 of the subcontract contained the payment terms and stated that payment would be made in reference to specific Work Orders. However, this was not an accurate representation of how the parties conducted business. Rather single interim monthly payments were used making reference to the works performed in that period. There was also an additional variation which dealt with payments to Aggregate in respect of asphalt removal. Whilst no agreement was formally introduced, Aggerate argued there was a contract by conduct. Amey insisted that whilst payments were continually made in accordance with the variation, the variation had no contractual effect. 

Aggregate served their notice of termination on 31^st January 2017, terminating the subcontract on 31 July 2017. Amey accepted that parties continued after 31^st July 2017 with the interim payments in relation to the asphalt removal. During this period an estoppel arose whereby Amey was not entitled to call for the final statement whilst the removal was still ongoing. This was brought to a close in July 2018 when Amey finally requested a final statement. Aggregate claimed that the conduct of the parties demonstrated an agreement to vary the subcontract in respect of payment arrangement, specifically for asphalt materials. Considering this variation, Aggregate believed that they now only had to provide a final statement within a reasonable time frame rather than one month. 

Mr Justice Eyre held that the parties had not varied the subcontract and their arrangement was better understood within the context of the estoppel. Since the parties had acted in such a way that prevented the original subcontract from being invoked whilst the additional work was persisting. Once the additional works eventually came to a stop so did the estoppel which allowed for the contractor to once again reply upon the original one-month deadline for the final statement.  The judge refused to declare that the obligation to provide a final statement within one month had become “a reasonable period”.  The subcontract made no provisions for the consequences of breaching the one month required for the final statement and therefore Justice Eyre refused to impose a sanction, whilst also refusing to allow the revision of any interim applications to determine their true value. The judge claimed that these were now to be referred to adjudication if necessary.

Comment

Mr Justice Eyre’s refusal to limit future adjudications on interim applications, does avoid fettering the right to adjudicate. But in turn, it now means that it may be left to an adjudicator to decide if future referral is acceptable. Additionally, the fact that the judge recognised the breach of contract but refused to impose sanctions, highlights the need for parties to consider actions that could halt the project and consequently draft sanctions to these into their contracts.