In the recent decision in Lidl Great Britain Limited v Closed Circuit Cooling Limited t/a 3CL [2023] EWHC 2243 (TCC) the TCC has given useful guidance on whether the Final Date for Payment can be linked to the provision of a valid VAT invoice.
The case concerned an application by 3CL to enforce an adjudicator's decision in its favour, under which the adjudicator ordered Lidl to pay 3CL the sum of £781,986.22. 3CL had previously applied for payment of this sum in accordance with a framework agreement between the parties. However, Lidl issued a notice valuing the sum due to 3CL as nil, and refused to pay on the basis that:
- 3CLs payment application did not satisfy the requirements of the framework agreement and so was invalid; and
- The final date for payment had not yet arisen as 3CL had failed to issue a valid VAT invoice.
In response to 3CLs application Lidl sought seven declarations which would, in effect, overturn the adjudicator's decision.
Ultimately, Lidl failed to obtain the declarations it sought, and the Court ordered enforcement of the adjudicator's decision.
The declarations Lidl sought ran almost the full gamut of arguments available to challenge a payment application, but the ones that were making the most waves in the industry were declarations 6 and 7 in the case. Namely:
"6. The Parties' agreement for the 'Final Date for Payment' complies with the requirements of section 110(1)(b) of the Housing Grants, Construction, and Regeneration Act 1996 (as amended).
7. In the absence of a VAT Invoice complying with the terms of the Payment Schedule, the Final Date for Payment for AFP19 has not yet occurred and no sum is therefore payable to the Defendant."
In essence, Lidl's terms sought to make calculation of the Final Date for Payment dependent on 3CL providing a valid VAT invoice.
Applying the previous decision in Rochford Construction Ltd v Kilhan Construction Ltd [2020] EWHC 941 (TCC) , HHJ Stephen Davies was categoric in finding that any payment provision which makes the Final Date for Payment conditional upon any further event is invalid. The judge cited Parliament's clear intention in the Construction Act to introduce "a blanket prohibition on party autonomy as regards the ascertainment of the final date for payment save as to the length of the period". He made clear it was not for the Court to look behind that.
The adjudicator's decision was therefore enforced, and Lidl was ordered to pay in full.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
