Hills Electrical and Mechanical plc v Dawn Construction Limited 1

United Kingdom

Where the parties do not make adequate provision as to payment, the Scheme for Construction Contracts will fill in the gaps. If some points have been agreed, these will not be replaced by the Scheme. The Scheme's payment provisions will not sweep away what the parties have agreed as to payment.

Lord Clarke, Outer House, Court of Session

7 April 2003

H entered into a sub-contract with D, the main contractor. D's employer had gone into administration on 10 October 2000. H commenced this action to recover sums due with interest from 5 October 2000. H claimed that the sub-contract failed to provide dates on which H should make applications for payment and also contained a pay when certified provision relating to the main contract. H said as a result the sub-contract had no adequate mechanism as required under s.110 of HGCRA for determining what sums became due and when. Therefore the Scheme should apply.

D said the final date for payment had been agreed between the parties. Even if the sub-contract did not comply with s.110, the agreement on the final date for payment should stand. The Scheme should not apply in its entirety. On H's case, the final date for payment was 17 days after money became due, on D's case it was 28 days. Due to the administration of D's employer and by virtue of other contractual terms, if H was correct, it should be paid (because the final date for payment would predate the administration), whereas if D was correct, H would not receive payment.

D relied upon the first instance decision in CB Scene Concept Design v Isobars in which it had been held that where parties had not provided as to what should be paid by interim payment, the Scheme would apply not only as to this point, but also as to notices and the effect of the failure to give notice and said though the Court of Appeal had not dealt with this point in overturning the decision, they had disapproved of this point.

The Court found that the effect of paragraph 1 of Part II of the Scheme was that it was not intended that all of the provisions regarding payment would be imported into a contract, where the parties had failed to make provision in respect of one or other aspects. The approach was to import the appropriate part of the Scheme to make up for the parties' omission. This was shown by the reference to "the relevant" parts of the Scheme would apply.

The part of the Scheme dealing with the final date for payment stood alone and would only come into effect where the parties failed to specify a final date for payment. Even where parties had not agreed in respect of other required provisions, if they had agreed a final date for payment, the Scheme would not replace that agreement. The Court therefore agreed with the approach at first instance in CB Scene Concept Design v Isobars.

The result was that the final date for payment of 28 days was not replaced by the Scheme date of 17 days. H's action was dismissed.

Where the parties do not make adequate provision as to payment, the Scheme for Construction Contracts will fill in the gaps. If some points have been agreed, these will not be replaced by the Scheme. The Scheme's payment provisions will not sweep away what the parties have agreed as to payment.

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