RGB Plastering Limited v Tawe Drylining and Plastering Limited

In the case of RGB Plastering Limited v Tawe Drylining and Plastering Limited the TCC considered the validity of an application for payment under the terms of the subcontract between the parties. In particular, the court determined whether or not the application could be relied on to recover monies in the absence of any Payment Notice or Pay Less Notice, in true “smash and grab” style. The case serves as a useful reminder of the importance of adhering to contractual payment terms.

The Facts

RGB Plastering Limited (RGB) engaged Tawe Drylining (Tawe) as the drylining subcontractor on a project in Portsmouth. The subcontract set out a system for interim payments in clause 18 of the terms and conditions and in the payment schedule. The latter included a table setting out the relevant dates for each payment cycle. These included for the April 2019 cycle that Tawe should issue its application on 28th of that month and the valuation or due date for such an application was 3 May. The corresponding dates for May 2019 were 29 May and 2 June respectively.

The payment schedule also contained the following provisions:

“1. All applications are to be submitted on or before the ‘Subcontractor issues application’ date, but valued up to the ‘RGB-Subcontractor valuation date.”

“2. Any applications received after the 28th of each month, will not be considered and will be administered with the following month’s payments, unless by formal agreement with the Commercial Manager/Di.”

“4. All applications must be submitted electronically via the email address applications@rgb-group.org – It is advisable that where possible a hard copy is also issued via post.”

The Application

Interim Application 6 (“the Application”) was emailed to various RGB employees ((though not to the email address stipulated in the payment schedule) 2 days late. It referred to “Works Valued up to 30/04/2019”, which was not a “valuation date” in accordance with the payment schedule. RGB did not pay the sums due and terminated the subcontract a few days later.

Following a ‘smash and grab’ adjudication in Tawe’s favour, RGB sought a declaration from the court that the Application was invalid, on the basis that it did not comply with the requirements for payment notices as set out in the subcontract.

Tawe contended:

1. The Application was made on the same standard template that had been used for previous payment applications.
2. As it was submitted on 7 May 2019, it fell to be considered as part of the payment cycle beginning on 28 May 2019.
3. Although it was not sent to the email address stipulated in the payment schedule, it was submitted to the email of the person who had dealt with all RGB’s previous payment applications.

Bearing in mind the factors above, RGB knew from experience what to do about the application and when.

Judgment

HHJ Jarman QC considered various case law on payment regimes and noted, in particular, the judgment in Henia Investments Inc v Beck Interiors Ltd [2015] which concluded that an application for payment must be “in substance, form and intent an Interim Application” and that any late application must be clear and unambiguous. He concluded that the Application was not only late, but also failed to value the works up to a date consistent with those in the payment schedule. It was not appropriate to infer that Tawe would have known what to do and when. The Application did not comply with the requirements of the subcontract, it was not clear or unambiguous and it was therefore invalid.

Tawe also raised an estoppel argument with regard to the strict contractual requirements (that RGB did make payments on other applications that Tawe issued late or sent to the wrong address) but it had served its witness evidence on this point late, and HHJ Jarman QC refused permission for it to rely on that evidence.
Comment

The case provides a useful reminder of the importance of agreeing – and complying with – clear and unambiguous payment terms. This is especially so when seeking to recover monies by way of a “smash and grab” adjudication. In this case the lateness of the application, the valuation of the works up to the wrong date and the sending of the application to the wrong email address, all resulted in the court’s finding that the application was invalid. It is in the interests of parties seeking payment to ensure that they comply with contract terms at all times.

This case also emphasises the importance of applying for payment before the required date where a contract expressly states that a late application will not be valued until the next valuation date, as is common in construction contracts. Furthermore, it highlights the need for legal practitioners to ensure all legal arguments applicable to the matter are presented in good time for them to be considered by the court.