Lidl Great Britain Limited v Closed Circuit Cooling Limited t/a 3CL [2023] EWHC 2243 (TCC)

In Lidl Great Britain Limited v Closed Circuit Cooling Limited t/a 3CL [2023], the TCC enforced an adjudicator’s decision in favour of a contractor and rejected a series of Part 8 declarations sought by the employer.

The Background to the Case

Lidl Great Britain Limited (“Lidl”) and Closed Circuit Cooling Limited t/a 3CL (“3CL”) entered into a framework agreement so that the parties could enter into a series of individual work orders for refrigeration and air-conditioning works at Lidl’s premises.

A payment dispute arose in respect of application for payment 19 (“AfP19”). Lidl sought to argue that AfP19 was invalid because it did not comply with provisions of the contract requiring the payment application to identify the milestones achieved and the amounts claimed against each; the provision of supporting evidence; and incorrect method of service by other means than email (the “Requirements”). 3CL argued that it had complied with the contract, and even if it had not, none of the points raised by Lidl amounted to conditions precedent to AfP19 being valid. 3CL also sought to argue that Lidl was estopped by convention from alleging it had failed to comply with the contract (“Issue 1”).

Separately, there was also a dispute as to the validity of Lidl’s purported notice in response to AfP19 (“Pay-7”) (“Issue 2”). 3CL also argued that provisions of the contract dealing with the final date for payment failed to comply with the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “Act”) because payment of the same purported to be conditional upon delivery of a contract compliant VAT invoice (which on Lidl’s case 3CL did not do), (“Issue 3”).

Previous adjudication

3CL referred the dispute to adjudication and the adjudicator rejected all of Lidl’s submissions finding that AfP19 was valid, Pay-7 was not a valid notice and that the final date for payment could not be conditional upon delivery of a VAT invoice. Payment was ordered in 3CL’s favour (the “Decision”).

Lidl failed to pay in accordance with the Decision and issued a Part 8 claim. In response, 3CL issued a Part 7 claim and a summary judgment application seeking enforcement of the Decision. This case concerns the outcome those competing claims.

What did the Court decide?

Contrary to Lidl’s position that the rules of natural justice had been breached because the adjudicator reached his Decision by reference to a clause of the contract that had not been expressly raised by the parties (such that Lidl had not had opportunity to address the same), the judge rejected this.  It was clear that Lidl had simply failed to respond to the point in its response and it failed to show that the point was properly arguable.

As to the declarations sought by Lidl:

Issue 1 – The judge found that compliance with the Requirements were not condition precedents to the validity of AfP19. Clearer wording would have been needed to this effect had that been the intention of the parties.

Issue 2 – Pay-7 was not a valid payment notice in respect of AfP19. Pay-7 was a pay less notice because as matter of content and substance: (a) this is what Pay-7 said it was; and (b) it included a deduction for liquidated damages when under the terms of the contract, that deduction ought to be the subject of a payless notice and not a payment notice.

Issue 3 – Owing to lack of certainty, the payment provisions of the contract failed to comply with section 110(1)(b) of the Act which requires every construction contract to “provide for a final date for payment in relation to any sum which becomes due”. Provision of a VAT invoice was not a condition precedent to the validity of AfP19 and Lidl could not withhold payment on this basis.

Conclusion

This case provides useful guidance on how competing Part 7 and 8 claims should be dealt with in adjudication and confirms that the final date for payment under a construction contract cannot be made contingent on submission of a VAT invoice. This case also provides helpful guidance on the issue of estoppel by convention and the validity of payment notices.

 

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E-mail: DSpires@hklegal.co.uk

 

This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.

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