What is the latest an interim-payment application can be issued?

Amy Pairman is an associate at Brodies LLP

The recent case of Elements (Europe) Ltd v FK Building Ltd will have practical, day-to-day implications regarding the timings around interim-payment applications.

“The court said that the law does not deal in fractions of a day”

The case relates to an interim application under the JCT Standard Building Sub-Contract Conditions (SBCSub/C) 2016 – the question for the court being whether an application issued at 10.07pm on the fourth day before the contractual deadline was valid. Clause 4.6.3.1 of the standard form provides that interim-payment applications are “to be received no later than four days prior to the interim valuation date”.

In the case, the interim valuation date was 25 October 2022. The subcontractor emailed the application on 21 October 2022, claiming £3.95m plus VAT. No pay-less notice was issued and so the contractor tried to argue that the sum was not due as the application was late.

The contractor’s argument was that “no later than four days prior” meant the application had to be received by the end of the site working hours on 20 October 2022 (five clear days). Even if it was wrong on that and the application could be received on the fourth day, the contractor argued that it had to be received by the end of site working hours on 21 October 2022. The subcontract specification set out that the site opening hours were 7.30am to 6pm Monday to Friday and 8am to 1pm on Saturdays, and so they said the application was late and invalid.

The court did not agree and held that the application had been issued in time. In coming to the decision, the court made three key findings:

1. Unless expressly stated, “days” does not mean clear days

The court held that the term “clear days” was a well-known concept and was different to “days”. Clause 4.6.3.1 states “days” not “clear days”, so the application only had to be received on the fourth day prior to the deadline.

2. Unless expressly stated, receipt on a “day” means up to 11.59pm on that day

The court said that the law does not deal in fractions of a day so, generally, if a contract specifies a day for performance of an obligation, then the party has until the end of that day to perform it. The court considered that just because the specification set out site opening hours, that did not put a restriction on the term “days” in clause 4.6.3.1. If a party wants a specific time limit, it needs to be expressly stated. The court said this meant the application in question could be received any time up to 11.59pm on 21 October 2022.

3. “To be received” means when it is in fact received – not sent

The court held that the application was “received” when it was actually received by the contractor’s server. This is because the court said that using the word “receive” within a contract “describes an act which needs to be established as having occurred”.

While not all JCT payment provisions are the same, the court’s reasoning is largely based on legal principles, meaning it could potentially be applied more widely. Indeed, construction contracts often provide for a range of notices/documents to be issued or received by a specific day. This decision suggests that if parties want there to be specific time limits, then they need to agree these expressly, as reference to being received by a “day” may allow receipt up to 11.59pm on the day in question. Likewise, parties may want to consider whether they wish to include deemed receipt provisions, as – without an express provision – this case suggests “received” means a party will need to prove actual receipt.

Finally, the case acts as a useful reminder of the importance of issuing pay-less notices, where the sum claimed in the application is not accepted.