Plastering, Payment and Prudence: The Importance of Strict Adherence to a Construction Contract’s Payment Terms.

RGB Plastering Limited. v Tawe Drylining And Plastering Limited. [2020] EWHC 3028 (TCC)

Most contractors will understand that prudently complying with a construction contract’s payment terms is the best way to ensure painless remuneration. In the case of RGB Plastering Limited v Tawe Drylining and Plastering Limited, a dispute between contractor and sub-contractor – in which the contractor challenged the validity of a slapdash interim application for payment – has further underlined the dangers of straying from contractual payment terms.

Background

Tawe had been sub-contracted by RGB to work on a project in Portsmouth. As required by the Construction Act, their agreement provided a mechanism for determining what payments would become due under the contract and when. In their case this included a payment schedule which, for the April 2019 cycle, required Tawe to issue its application for payment on the 28 April, with the valuation date for the application being 3 May. In a set of very clear stipulations, the sub-contract also stated that:

  1. applications needed to be submitted before the issue date, but must value the works up to the valuation date;
  2. applications made after the issue date would not be considered; and
  3. the application must be submitted electronically to a specific email address. (original emphasis)

The interim application for payment at the heart of this dispute was emailed to various RGB employees (though not the specified email address) on 7 May 2019. It stated it was for “works valued up to 30 April”.  Following an earlier adjudication in Tawe’s favour, RGB sought declaratory relief from the TCC on the basis that Tawe’s application had not complied with any of the subcontract’s requirements.

Decision

As you might have expected, the court agreed that Tawe’s application was invalid and RGB were not obliged to pay the amount in the application. Citing a growing body of case-law on the importance of compliance and clarity [1], the judge declared that interim applications for payment under a construction contract must comply with the requirements of the contract and be ‘clear and unambiguous in form, substance and intent’.  Hoping to rely on earlier instances in which RGB had accepted applications which didn’t comply with the contract’s regime, Tawe also tried to advance an estoppel argument in the case. Though unlikely to work in any event, these arguments were ruled inadmissible by the court due to Tawe’s late filing.

RGB v Tawe is another stark reminder of the importance of complying with a contract’s interim payment terms. Tawe’s application for payment – unclear and ambiguous – did not comply with the requirements of the subcontract and was thus ruled invalid by the court. Contractors should avoid making this mistake, and employers may be more confident rejecting payment applications which fail to comply with payment terms

[1] Celedonian Modular Ltd v mar City Developments Ltd. [2015]  EWHC 1855; Henia Investments inc. v Beck Interiors Ltd. [2015] EWHC 2433 (TCC).

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