Stage payments under a construction contract – the Court of Appeal view

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Balfour Beatty v Grove Developments [2017] BLR Court of Appeal

Facts

This case was covered by us last year when Balfour Beatty had agreed an express contractual instalment scheme for 23 regular instalments. The job ran over and Balfour Beatty asked for a 24th and 25th instalment.  The Court said no Balfour Beatty had got paid the instalments agreed and contracted for and was not entitled to anything else.  It would have to perform the rest of the job on a credit basis and get paid at the end.  Balfour Beatty appealed.

Held

  1. There was no need to imply a contractual term for continued instalments after no. 23 for “business efficacy”.
  2. The agreement for 23 instalments was a compliant interim payment arrangement, as required by section 109 of the Construction Act 1996, and therefore the Statutory Scheme for Construction Contracts did not apply.

Comment

  1. The Court of Appeal entirely upheld the TCC Decision. Balfour tried to say that the situation was not “business common sense”, which seems a fair comment – BUT the Court can only step in to apply the parties’ intentions if, and only if, the plain and actual meaning of the words is not clear. There was nothing ambiguous about the 23 instalment schedule nor was there any room to find that the wording was uncertain so as to allow the Court to step in.
  2. Unless a term is implied by statute, the Courts will be slow to find implied terms unless the contract simply does not work without that term being assumed as part of the contractual mechanism. Here the contract worked perfectly well. It was simply that the burden of cash flow reversed from the payer on to the payee if the job ran over beyond 23 months. Balfour Beatty had made a clear contractual bargain and must live with it.
  3. All that the HGCRA (Construction Act) 1996 requires is that there should be a scheme for interim payments. This does not empower the Court to set aside that scheme if it operates unfairly or in unexpected ways.
  4. The result was unexpected but the moral, as always, is that we get the contracts we sign up to, not the ones we decide with hindsight we would have like to have had.

For more specialist legal advice call Keith Bishop, Head of Construction & Engineering, on
0191 211 7983 or email [email protected]