Charles Edwin Edwards MSt(Cantab) MSc(Lond) FCInstCES Barrister
Charles Edwards, Construction Barrister and Head of Chambers at Gray’s Inn Construction Chambers, reviews the recent case of Elements (Europe) Ltd v FK Building Ltd [2023] EWHC 726 (TCC) High Court (TCC) which provides very useful guidance on the meaning of what constitutes a ‘calendar day’ pursuant to Clause 4.6.3.1 of the JCT Standard Building Sub-Contract Conditions SBCSub/C 2016 Edition, and whether an interim application for payment made by a Sub-Contractor late in the day and outside business hours was valid.
FK Building Limited (the “Contractor”) engaged Elements (Europe) Ltd (the “Sub-Contractor”) by a Sub-Contract which incorporated the JCT Standard Building Sub-Contract Conditions SBCSub/C 2016 Edition, to carry out remediation works to 312 bi-split apartment modules as part of the design and construction of three buildings to comprise of a 156 residential apartment scheme. Following the Sub-Contract, The Contractor and Sub-Contractor entered a Deed of Variation, which varied multiple terms of the Sub-Contract, including increasing the scope of works and the Contract Sum to £7,405,272.78.
A dispute arose between the Contractor and the Sub-Contractor concerning the contractual validity of a payment application due to the time at which the application for payment was received by the Contractor. This is an issue of importance to the construction industry. An adjudicator’s decision dated 17 January 2023 awarded the Sub-Contractor the sum of £3,950,190.53 plus interest and costs following a dispute between the parties. The Contractor failed to make payment and contended that the payment application from the Sub-Contractor was contractually invalid because it was received late. The Sub-Contractor sought summary judgment in the Technology and Construction Court (TCC) in the sum of £3,950,190.52 plus interest and costs. The Sub-Contract between the Contractor and the Sub-Contractor included the following conditions:
“Clause 4.6…of the Sub-Contract Conditions provides:
4.6.1. During the period up to the due date for the final payment fixed under Clause 4.22.1 … the monthly due dates for interim payments shall in each case be the date 12 days after the relevant Interim Valuation Date …
4.6.3. Where Clause 4.6.2 does not apply, the Subcontractor may make a payment application in respect of an interim payment to the Contractor either:
4.6.3.1. so as to be received not later than 4 days prior to the Interim Valuation Date for the relevant payment …”
Sub-Contract Particulars Item 10 provides that:
“The first Interim Valuation Date is 25th June 2021 and thereafter the same date every fortnight [sic] for a period of two months following which the date shall be the same in each month or the nearest business day in that month.”
Clause 4.7.1. provides that:
“Subject to Clause 4.7.4 the final date for payment of any payment shall be 21 days after the due date as fixed in accordance with Clause 4.6.1 …”
The Specification provides:
“The site will be open for the Sub-Contractor to carry out the Sub-Contract Works from 7.30 a.m. to 6.00 p.m.Monday to Friday except on any dates stated in item 2.2. On Saturdays the site will be open from 8.00 am to 1.00 pm” [Emphasis added]
It was agreed between the parties, that the Sub-Contractor issued its Payment Application No. 16 (‘the Application’) via email on 21 October 2022, timed at 22.07. Payment Application No. 16 by the Sub-Contractor was in the total sum of £3,950,190.53. There is no dispute between parties that the Sub-Contractor’s email and its attached payment application No. 16 were received by the Contractor’s on the same date it was sent, between 22.07 and 22.08.
The Contractor contended that the Sub-contractor’s Payment Application No 16 was submitted late and was therefore contractually invalid due to the time it was received. Further the Contractor proceeded to state that in order to rely upon the lack of a Pay Less Notice, a payee needs to demonstrate that its application for payment was contractually valid. Therefore, the failure to serve a timely Pay Less Notice would not lead to any obligation upon the Contractor to make payment of the sum (invalidly) applied for irrespective of a ‘late’ Pay Less Notice. Further the Contractor argued that correctly construed, Clause 4.6.3.1 of the JCT Standard Building Sub-Contract Conditions SBCSub/C 2016 Edition, means that the Sub-Contractor’s application for payment:
“(1) needs to be received on or before the end of site working hours on 20th October 2022; alternatively
(2) needs to be received on or before the end of site working hours on 21st October 2022.”
The Contractor regarding both propositions, emphasised that the word ‘received’ is used in Clause 4.6.3.1 of the JCT Standard Building Sub-Contract Conditions SBCSub/C 2016 Edition is different to that used in other JCT Forms, and in other parts of the JCT Standard Building Sub-Contract Conditions SBCSub/C 2016 the Edition.
The Contractor contrasted the use of the word ‘give’ in paragraph 4.7.2 when referring to the requirement on the Contractor to ‘give a notice’ not later than 5 days after the due date which specifies the sum that he considers to be or have been due at the due date. In the view of the Contractor, the use of different language must be considered to have been intentional, therefore Clause 4.6.3.1 is focussing on actual receipt by the Contractor.
In reference to the Contractor’s first the argument, relating to 20th October 2022, it is said that this is the result of requiring that the Payment Application to be received no later than 4 days prior to the Interim Valuation Date, which was agreed as 25th October 2022. If some time on 21st sufficed, that would only amount to between three and four days prior to 25th October 2022. According to the Contractor, such a construction would meet ‘the reasonable commercial expectations of the parties’.
The Sub-Contractor contended that the Contractor’s argument amounts to a contention that Clause 4.6.3 of the JCT Standard Building Sub-Contract SBCSub/C 2016 Edition requires the notice to be served 4 ‘clear’ or ‘full’ days, and that no such language was used in the Sub-Contract. The Contractor submitted that the rule in English law when interpreting contracts, a day is treated as an indivisible whole and fractions of a day are ignored: In Lester v Garland (1808) 15 Ves 248, Sir William Grant MR held:
‘Our law rejects fractions of a day more generally than the civil law does. The effect is to render the day a sort of indivisible point; so that any act, done in the compass of it, is no more referable to anyone, than to any other, portion of it; but the act and the day are co-extensive; and therefore the act cannot properly be said to be passed, until the day is passed.’
The Sub-Contractor referred to Cartwright v MacCormack [1963] 1 WLR 18, to exemplify the application of this principle, in the context of an insurance policy. The Sub-Contractor further relies upon Lewison on the Interpretation of Contracts 7th Edition at 15-11 to 15.15. At paragraph 15-11, Lewison says:
‘There are many different ways of reckoning a day. As a period of time a day is the time occupied by the earth in one revolution on its axis, in which the same terrestrial meridian returns to the sun; a period of 24 hours reckoned from a definite or given point. A solar or astronomical day is reckoned from noon to noon, while the civil day in most civilised countries is reckoned from midnight to midnight. 20 A calendar day is reckoned from midnight to midnight. In its ordinary sense, the word “day” in a contract refers to a calendar day. Thus where a contract specifies a day for performance of an obligation, the obliged party has until the end of that day to perform it (midnight).’
Lewison proceeds to state that the context of a particular contract may show that the word ‘day’ means a period of 24 hours reckoned from some other time of day. He refers to Cartwright v MacCormack which considers the meaning of ‘working day’ and identifies that the House of Lords considered (in Afovos Shipping Co SA v Pagan [1983] 1 W.L.R. 195) that once a working day had been identified, subsequently the whole of the day counts as a working day. This argument reflects the general principle stated that the law does not generally deal in fractions of a day.
The Sub-Contractor contended that the effect of said principle, unless stated otherwise, is that a ‘day’ simply means a ‘day’ and should be distinguished from ‘full’ or ‘clear’ days. The Contractor further makes reference to Cubitt Building & Interiors Ltd v. Fleet Glade Ltd [2006] EWHC 3413 (TCC) in which HHJ Coulson QC (as he was then) dismissed an argument that ideas found in the civil procedure rules, such as deemed service should be read into construction contracts in the context of construction adjudication. Upon reliance on this authority, the Contractor submitted that the civil procedure practice that “days” mean “clear days” is also inapplicable.
The Sub-Contractor argued that the Sub-Contract provides no restriction on the time of day in which a Payment Application may be made and received pursuant to the JCT Standard Building Sub-Contract Conditions SBCSub/C 2016 Edition. Further, it was asserted that the ‘fractions of a day’ principle as applicable for overriding his second argument that the Specification referring to site opening times is irrelevant and identifies the fact that the provision pertains to the time during which the Sub-Contractor was entitled to carry out its work and relies upon the lack of any cross-reference between Clause 4.6.3.1 of the Sub-Contract and this part of the Specification, if the parties had intended it to be definitive of the times permitted for service of a payment application. A further argument submitted was that the Contractor’s proposed construction of the Sub-Contract would lead to uncertainty regarding the definition of the hours within which a payment notice could be validly served and that the construction should be determined by referring to the words of the Sub-contract.
The Sub-Contractor in written submissions, argued that that the payment mechanism was operated by both parties outside of site opening hours. Examples given by the witness evidence include: (i) Payment Application No. 11, sent by the Sub-Contractor at 20:19 on Friday 20 May 2022 (ii) the Contractor’s Pay Less Notice No 21 sent at 23:31 on Friday 22 July 2022, and (iii) Payment Application No, 14, sent on behalf of the Sub-Contractor at 20:59 on Sunday 21 August 2022. This the Sub-Contractor argued demonstrated that it was normal for members of the QS team and for senior management to work for extensive hours including evenings and weekends as part of their normal work schedule, and to receive emails at those times.
At paragraph 37 of the judgment, the Court stated:
“There is a long line of established authority that the Court does not deal in fractions of a day. This is made clear in Lester v Garland, cited above. This principle is reflected in the text of Lewison as relevant to when, on the proper construction of contract, a contractual obligation is to be performed. Generally, where a contract specifies a day for performance of an obligation, the obliged party has until the end of that day to perform it. The principle was also very recently the subject of consideration in the TCC in Boxxe v Secretary of State for Justice [2023] EWHC 533 (TCC) in which the Court referred to and applied the ‘fraction of the day’ principle in the context of whether a Decision Notice served at 4.55pm was to be considered served on the day itself, or the following day:
‘In Trow v. Ind Coope (West Midlands) Ltd. [1967] 2 Q.B. 899, referred to by Chadwick LJ in the passage above, writs were issued at 3.05pm on September 10, 1965. They were served on the defendants on September 10, 1966, at 11.59 a.m. and 12.49 respectively. The Rules stated that ‘a writ is valid for 12 months beginning with the date of its issue’. The first question related to whether account could be taken of the time of day on which the writs were served. The Court of Appeal unanimously determined that this was not the case. As Lord Denning MR put it,
‘When we speak of the date on which anything is done, we mean the date by the calendar, such as: “The date today is May 2, 1967.” We do not divide the date up into hours and minutes. We take no account of fractions of a date.’
Thus, the relevant date was simply September 10, 1966. In the present case, therefore, the time that the Decision Notice was received is not relevant. The relevant date is simply 13 December 2022. The key question is whether that date (as a whole) should be included, or excluded from the calculation of time.’
At paragraph 38 the Court stated:
“Applying these principles to present case, unless the Sub-contract provided otherwise, a payment application required to be made so as to be received by FK no later than 21st October 2022, could be made so as to be received at any time on 21st October 2022, up to 23.59.59, because the law does not count in fractions of a day.” [Emphasis added]
At paragraph 39, the Court stated:
It is of course open to parties – as they often do – to require within a contract that particular documents or notices need to be provided within defined time periods (whether loosely (e.g. ‘within business hours’) or specifically (e.g. ‘between 9am and 5pm’)). Just as the Sub-contract was not specific that there needed to be 4 ‘clear’ days, neither did it stipulate that the application had to be received by a particular time period on the relevant day. [Emphasis added]
Conclusion
To summarise:
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- The Court further refused to accept the Contractor’s argument that “the part of the Specification setting out when the Site would be open for the Sub-Contractor to carry out the works can be read as importing a restriction upon the words ‘4 days’ in clause 4.6.3.1 of the Sub-Contract. Not only is there no wording within the Sub-contract to suggest it can be, it is obviously irrelevant when tested against other reference to ‘days’ within the Sub-Contract more generally. For example, the final date for payment in clause 4.7.1 is ‘14 days’ after the due date. This plainly does not mean ‘days’ calculated by reference to when the site is open: if so, it would be a period equating to 15.5 calendar days (the site being shut on Saturday afternoons and a Sunday). Put simply, the site opening times within the Specification have nothing to do with the proper construction of the word ‘days’ within the payment and notice provisions required for compliance with the HCGRA.” [Emphasis added]
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- The Court held that the Sub-Contractor’s Payment Application No. 16 was valid despite the time it was received by Contractor (between 22:07 and 22:08).
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- The Sub-Contract was not specific that there needed to be 4 ‘clear’ days, neither did it stipulate that the Payment Application had to be received by a particular time period on the relevant day.
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- Payment Application No. 16 by the Sub-Contractor was made to be received on 21st October 2022, which was not later than 4 days prior to the Interim Valuation date and was therefore validly served. There was no error by the adjudicator in this respect, and the adjudicator’s decision was enforced by the Court. The Sub-Contractor’s Payment Application was required to be made to be received by the Contractor no later than 21st October 2022, therefore it could be made so as to be received at any time on 21st October 2022, up to 23.59, because the law does not count in fractions of a day.
- It is open to parties to a construction contract to require that particular documents or notices need to be provided within defined time periods (‘within business hours’) or specifically (e.g. ‘between 9am and 5pm’).
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- Finally, it should be noted that the parties agreed to a settlement prior to the judgment being handed down.
For further information with regard to the resolution of payment related issues as set out above, please do not hesitate to contact Charles Edwards Construction Barrister at Gray’s Inn Construction Chambers on: cedwards@graysinnconstructionchambers.co.uk to see how chambers can assist you or your organisation. The above is for general information only and to encourage discussion and does not constitute legal advice. The author does not assume any responsibility for the accuracy of any statements made and appropriate legal advice should be taken in each instance and relied upon before taking or omitting to take any action in respect of any specific matter.
Charles Edwin Edwards MSt(Cantab) MSc(Lond) FCInstCES Barrister
Gray’s Inn Construction Chambers
60 Gray’s Inn Road
London WC1X 8AQ
Tel: +44(0)203 286 0008
