The Respondent, Grove Developments Ltd (“Grove”), entered into a JCT Design and Build Contract 2011 (subject to bespoke amendments) with Balfour Beatty Regional Construction Ltd (“Balfour Beatty”) to design and construct a hotel and serviced apartments in Greenwich Peninsula.

Having already obtained the first instance decision from Stuart-Smith J, this was an appeal by Balfour Beatty regarding the contractual position in relation to interim payments and the payment schedule which had run out. The principal issues were whether there were contractual terms, either express or implied, in relation to interim payments following the intended contractual completion date and the effect of s.109 of the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”).

Giving the leading judgment, Jackson LJ rejected the appeal, determining that a proper construction of the contract and payment schedule made clear that there was to be no interim payments after the contractual date for completion with the Tumber Schedule. He further held there was no express or implied term to the contrary and the Tumber schedule did satisfy the requirements of s.109 Construction Act and therefore the Scheme for Construction Contracts (England and Wales) Regulations (the “Scheme”) did not apply.

In relation to any contractual entitlement to interim payments, Jackson LJ rejected the Appellant’s submission that there were express terms regarding payment and that in any event there were implied contractual terms providing for interim payments beyond July 2015 (the intended contractual completion date). Jackson LJ held that the requirements for implication of proposed term as set out in Marks and Spencer v BNP Paribas Securities Services Trust [2015] UKSC 72 were not met and therefore this ground was rejected.

Turning to the Scheme, Jackson LJ held that this did not apply. He went on to consider s.109 which provides that a party is entitled to interim payments for work undertaken within a construction contract. Jackson LJ rejected the claim by Balfour Beatty that “any” could be construed as meaning “all” and stated that in his view, “the subsection is a more general one saying that work done under construction contracts shall (except in very short projects) be subject to a range of interim payments”.

Additionally, s.109(2) was held to afford the parties “considerable latitude” when deciding a regime of payment. Having been referred to a passage from Keating on Construction Contracts, Jackson LJ said that he had some doubt that the Scheme could be avoided on the basis of a provision for an interim payment of “an insignificant amount”. He went on to say that his decision did not require him to decide this point and was therefore satisfied that the Tumber Schedule setting out payment terms satisfied the necessary requirements.

This case highlights the importance of taking care when drafting payment schedules to ensure that interim payments are able to continue should the contractual completion date be delayed, otherwise the contractor could be in the position that he has no contractual right to apply for further payments until practical completion. This could have an impact on cash flow if he has to wait until the post-practical completion payment mechanisms kick in.