Guide to Using the RIBA Professional Services Contracts 2018 - Other - Page 55
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Guide to RIBA Professional Services Contracts 2018
A legal interpretation
The importance of following the procedures set down by the HGRA and the
Contract cannot be emphasised enough as can be seen from many legal cases,
usually involving Contractors. Kersfield Developments (Bridge Road) Ltd v Bray and
Slaughter Ltd (2017) is one of the latest in a long line of disputes about payment
applications becoming due automatically in cases where the paying party has failed
to give a Payment Notice and Pay Less Notice on time or at all.
The court rejected Kersfield’s argument, relying on the line of cases such as ISG
Construction Limited v Seevic College (2014) and Galliford Try Building Ltd v Estura
Ltd (2015) as authority for the rule that there is no basis to challenge a ‘Notified Sum’
once it has become due. The court stated:
“… where a particular interim payment has been fixed by the default notice
mechanism under the contract, as in this case, there is no contractual basis on
which to revise that payment by reference to a proper valuation of the works
and therefore there is no relevant dispute that can be referred to adjudication.
I acknowledge that the default notice mechanism under the Act might result in
unfairness or hardship to an employer in circumstances where the contractor
received a windfall from the employer’s procedural failure. However, it simply
regulates the cash flow as between the parties and does not affect their substantive
rights. The employer could protect its cash flow by serving one or both of the
notices that could put in dispute the sum claimed by the contractor. This finding
does not preclude a challenge to the valuation of the works and/or any claims and
cross-claims for the purpose of subsequent interim payments or for the purpose of
determining the sums due on a final and conclusive assessment.”
This is a case which demonstrates to paying parties the importance of serving
Payment Notices and Pay Less Notices on time and strictly in accordance with the
terms of the Contract. The courts have been very clear in their approach to these
types of cases where the requisite notices have not been served. The paying party
must immediately pay the sum which has been applied for and then set about
recovering any alleged overpayment by other means. Given the potentially serious
financial consequences this can have, it cannot be emphasised enough that paying
parties must have a robust system in place for the issue of timely notices.
What if the Client doesn’t pay?
Even with the issue of valid Payment Notices and Pay Less Notices, the Client may
still refuse to pay the Architect/Consultant’s account. The Contract does not give the
Client the right to withhold any amount due unless the amount has been agreed with
the Architect/Consultant or has been decided by any tribunal to which the matter is
referred.
If the Client defaults and does not pay in the contracted timescale, the Contract
gives the Architect/Consultant a number of options. The Architect/Consultant can
suspend use of the copyright licence (clause 6), suspend or terminate performance
of the Services and other obligations under the provisions (clause 9), start dispute
resolution procedures and/or take steps to recover the debt.
When pursuing a claim, and if the Notices are valid, an adjudication arising as a
result of a failure to pay will now be more straightforward, quicker and less expensive
as the adjudicator only needs to establish the accuracy of the Payment Notice rather
than to have to assess the sum due.
In any late payments, the Architect/Consultant is entitled to claim simple interest
on those amounts until the date that payment is received at 8% per year over the
dealing rate of the Bank of England, current at the date that the payment becomes
overdue. To this can be added reasonable cost incurred by the Architect/Consultant
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