We are all now very (and, perhaps, overly!) familiar with the use of the phrase 'smash and grab' in adjudication. All sorts of arguments with regards to this type of adjudication have been before the courts. However, I recently represented a sub-sub-contractor in adjudication proceedings in which everything largely turned on a novel point of law.
By way of background, a sub-sub-contractor (my client) was engaged by a sub-contractor to undertake a works package at a particular site. There were problems throughout the project and the sub-contractor's valuation of the work regularly fell well below the sub-sub-contractor's valuation included in its monthly applications for payment. Payments from the sub-contractor were also regularly very late indeed. At various points during 2020 the parties entered periods of protracted negotiations over valuation and payment, but an amicable solution was never found.
In December 2020 the sub-sub-contractor applied for payment in the usual manner. The sub-contractor responded with a pay less notice, purportedly served not later than five days prior to the final date for payment (the final date for payment being forty-five days from application date). However, upon a review of the documents, my view was that the sub-contractor had actually served the pay less notice four days prior to the final date for payment (one day later than the latest date upon which it could be validly served). I recommended to my client that the dispute be referred to adjudication on the basis that the pay less notice was invalid and the full sum claimed in the application for payment (some c£450k) should have in fact been paid by the final date for payment. My client (the Referring Party hereinafter) agreed, and we commenced adjudication proceedings against the sub-contractor (the Responding Party hereinafter), seeking full payment of the sum contained in the Referring Party's application on the basis that a payment and/or pay less notice had not been validly served in response to it. Nothing really out of the ordinary there, so far.
However, where this becomes more interesting is that this particular dispute turned on an express term of the sub-contract (one of the JCT forms) which provided that:
"Where under this Sub-Contract an act is required to be done within a specified period of days after or from a specified date, the period shall begin immediately after that date. Where the period would include Christmas Day, Good Friday or a day which under the Banking and Financial Dealings Act 1971 is a bank holiday that day shall be excluded"
The Referring Party had issued its application for payment on 31st December 2020. The Responding Party had served a purported pay less notice on 10th February 2021.
In the adjudication proceedings the parties were in agreement that the final date for payment was 45 days from the application date. The parties were also in agreement that, if to be validly served, the pay less notice had to be served not later than 5 days prior to the final date for payment.
The Referring Party said that the final date for payment was 14th February 2021 (that being 45 days after the application date of 31st December 2020), and that the latest date on which a pay less notice could be validly served was therefore 9th February 2021 (5 days prior to the final date for payment).
The Responding Party said that it agreed that the date from which the final date for payment was to be calculated was the application date of 31st December 2020. However, the Responding Party disagreed that the final date for payment was 14th February 2021. The Responding Party said that, when accounting for the clause I set out above, the final date for payment was actually 15th February 2021 (because New Year's Day (1st January 2021) was a bank holiday and should therefore be discounted when calculating the 45 days from the application date for the purposes of the final date for payment). The Responding Party said that because the final date for payment was 15th February 2021, its pay less notice was validly served on 10th February 2021.
I argued that the Responding Party was misconceived because the clause I set out above only applied when "an act is required to be done within a specified period of days after or from a specified date" and was therefore not engaged in this case [emphasis added].
For example, the clause would be engaged where a payment notice is required to be given not later than five days after the due date and one of those days is a bank holiday (in which case the period for the giving of the notice would of course then be six days). Such a scenario meets precisely with the express drafting/words used in the clause (it being an act required to be done within a specified period of days (that period being five days) after a specified date (that date being the due date)).
By way of a further example, the clause would also be engaged where a pay less notice is required to be given not later than five days before the final date for payment and one of those days is a bank holiday (in which case the period for the giving of the notice would of course then be six days). Such a scenario meets precisely with the express drafting/words used in the clause (it being an act required to be done within a specified period of days (that period being five days) from a specified date (that date being the final date for payment)).
I argued that the clause I set out above plainly does not apply (and, indeed, nor does it in any way state or otherwise indicate that it applies) to merely the calculation of a future date (including, without limitation, the calculation of the final date for payment) because the calculation of a future date is plainly not an act which is required to be done within a specified period of days after or from a specified date; it is merely the calculation of a future date (the relevant date in the instant case being the final date for payment). Consequently, the clause I set out above had absolutely no impact whatsoever upon the final date for payment in the circumstances.
The Responding Party argued that payment is clearly a physical act required to be done within a specified period of days (45) after or from a specified date (31st December 2020). The giving of a notice is also a physical act (albeit with different timescales). It said that the clause I set out above therefore applies to both situations.
The Adjudicator (a very prominent barrister) agreed with my argument and found in favour of my client (the Referring Party). The Responding Party failed to pay the sum awarded so we commenced proceedings in the TCC to enforce the Adjudicator's Decision. In response, the Responding Party commended Part 8 proceedings to have the correct interpretation of the clause I set out above finally decided. A hearing date was set, but a few days prior to the hearing the parties managed to reach a settlement and the proceedings were then disposed of.
It was actually a very interesting adjudication and one which I feel could have gone either way in the TCC (although I do, of course, believe that my argument was far stronger than theirs!). Anyhow, I guess we shall never find out now unless and until this particular point comes before the courts in the future.
On a related note (and the reason why this article may be of wider interest), many of the JCT forms of contract contain a clause similar to the one which I set out above. Section 116 of the Housing Grants Construction and Regeneration Act 1996 (as amended by the Local Democracy Economic Development and Construction Act 2009) also contains a very similar provision, and for ease of reference I reproduce it below:
"116 Reckoning periods of time
(1) For the purposes of this Part periods of time shall be reckoned as follows.
(2) Where an act is required to be done within a specified period after or from a specified date, the period begins immediately after that date.
(3) Where the period would include Christmas Day, Good Friday or a day which under the [1971 c. 80.] Banking and Financial Dealings Act 1971 is a bank holiday in England and Wales or, as the case may be, in Scotland, that day shall be excluded."
Perhaps, when it comes to calculating final dates for payments at least, all is not so quiet on New Year's Day after all.....
Dean Sayers, Sayers Commercial