Background
VDC LHR11 Limited engaged Deerns UK Limited under a consultancy agreement dated 23 April 2025 to provide engineering services at Chandos Park Estate, London NW10. Disputes arose over two applications for payment — Applications 7 and 8 — with due dates of 4 February 2026 and 6 March 2026. Deerns sought £910,501.71 plus VAT, contending that VDC’s pay-less notices (served 27 February and 25 March 2026) were out of time.
The central question was whether clause 7.2 of the contract satisfied section 110(1)(b) of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA), which requires every construction contract to provide a final date for payment. Clause 7.2 set the final date for payment at 30 days after the relevant due date but expressly provided that if the consultant’s invoice was issued late, the final date for payment would be postponed by the same number of days. Deerns argued this made the final date variable — not a fixed period from the due date — so the Scheme for Construction Contracts applied, setting the final date at 17 days from the due date and requiring pay-less notices no later than 5 days before that date. Under those parameters, VDC’s notices were served after the applicable deadlines.
VDC disputed this interpretation, arguing the Schedule of Valuation Dates (which used a “c + 30” formula) demonstrated the parties intended a fixed 30-day period and that the contract should be read as HGCRA-compliant. VDC also advanced fall-back arguments: an estoppel by convention arising from how the contract had been operated; a principle that the Scheme should be applied with minimum disruption to the parties’ agreed terms; and a stay of execution on solvency grounds.
The Court’s Holding
Mr Justice Eyre held that clause 7.2, properly interpreted, did not provide a compliant final date for payment under section 110(1)(b) of the HGCRA. Following Rochford Construction Ltd v Kilhan Construction Ltd [2020] EWHC 941 (TCC) and Lidl Great Britain Ltd v Closed Circuit Cooling Ltd [2023] EWHC 2243 (TCC), the court confirmed that the Act permits parties only to agree the length of the period between the due date and the final date for payment — not to peg the final date to any further event or condition. Because clause 7.2 expressly permitted the final date to be postponed by reference to the lateness of the consultant’s invoice, the final date was not a fixed period from the due date. The contract therefore failed to provide a final date for payment in accordance with the Act, and the Scheme applied.
The court rejected VDC’s argument that only events occurring after the due date are problematic. Whether the triggering event precedes or follows the due date is immaterial: what section 110(1)(b) demands is certainty — a fixed period from the due date — and any provision that moves the final date by reference to something other than the due date itself is equally deficient. The court also declined to give the Schedule of Valuation Dates priority or special interpretive weight over clause 7.2, finding no basis in the contract’s structure for treating the schedule as a separately negotiated or superior instrument.
Under paragraph 8(2) of the Scheme, the final dates for payment were 17 days from the respective due dates: 21 February 2026 (Application 7) and 23 March 2026 (Application 8). Pay-less notices were therefore required by 16 February and 18 March. VDC’s notices of 27 February and 25 March were out of time, and Deerns was accordingly entitled to the notified sums.
Key Takeaways
- A clause that postpones the final date for payment by the number of days a consultant’s invoice is issued late does not provide a “final date for payment” within the meaning of section 110(1)(b) HGCRA, even if the underlying due date is fixed — because the final date is no longer solely a function of the due date.
- The prohibition on party autonomy over the ascertainment of the final date for payment is a blanket one: it applies equally to events occurring before the due date as to those occurring after it.
- Courts will not adopt a strained contractual reading simply to avoid engaging the Scheme; the compliance-preference canon only operates where two equally legitimate interpretations are available.
- The principle from Bennett (Construction) Ltd v CIMC MBS Ltd [2019] EWCA Civ 1515 — that the Scheme should do minimum violence to the parties’ agreement — governs how the Scheme is incorporated once non-compliance is established, not the prior question of whether the contract complies.
Why It Matters
This decision reinforces and extends the line of authority from Rochford and Lidl: drafters of construction contracts cannot preserve flexibility in the payment timetable by conditioning the final date on invoice timing, whether before or after the due date. Any such mechanism fails the HGCRA’s binary test, and the Scheme will step in — potentially on materially shorter timetables than the parties contemplated, with severe consequences for the validity of pay-less notices.
For employers and contractors alike, the case underscores the importance of building robust, event-independent payment dates into contracts at the outset. Relying on carefully formatted payment schedules to imply compliance, without ensuring the operative payment clause itself fixes a period from the due date alone, remains a material risk that — as VDC discovered — can render a multi-hundred-thousand-pound pay-less notice regime ineffective.