A High Court judge has ruled that Balfour Beatty was not entitled to a £23m interim payment it claimed on a hotel and leisure development in North Greenwich.
The contractor won the £121m deal to design and build Grove Development Ltd’s (GDL) 18-storey hotel near London’s O2 in July 2013.
Work on the hotel started that month and had been scheduled to complete last July, but the project remains unfinished.
Balfour Beatty and the client agreed 23 monthly payments for the job, covering the period up to the planned completion date. However, Balfour then issued a further payment notice (IA24) for £23m, which GDL said it “had no contractual right to issue”.
The contractor claimed the agreement between it and the client had included a de facto right to issue interim payment notices beyond the 23 set out in the contract.
In August, GDL’s agent McBains Cooper issued a payment certificate for £2.3m in response to the contractor’s additional interim payment notice. In a covering letter, the agent wrote: “In accordance with the contract, you are notified that the employer [GDL] may withhold or deduct liquidated damages.”
GDL then issued a pay less notice in September 2015, which Balfour Beatty claimed was invalid, as it was issued too close to the due date for the disputed interim payment.
Balfour contended that it had been entitled to an extension of time and, therefore, to have issued a payment notice beyond the original 23-month schedule.
Based on this contention, the contractor challenged the lawfulness of the deductions made by the client.
In his judgement, Mr Justice Stuart-Smith found that Balfour Beatty “had no contractual right to make or be paid in respect of [payment notice] IA24”.
The judge rejected Balfour’s case that payments beyond the agreed 23-month schedule were “implied”.
In his conclusion, he wrote: “The proper analysis of what both parties were doing and did is that both were open to the prospect of further interim payments, and they were working towards an agreement that would entitle BB to further interim payments if they could agree the terms on which such interim payments were to be made.
“But in this case agreement on the terms… was a pre-condition to a concluded and legally binding agreement.”
Interim payments are typically made on jobs to alleviate potential cashflow problems for contractors.
The judgement could still be open to further legal challenge from Balfour Beatty, while the amount of money owed by GDL – if any – has yet to be determined.
A spokeswoman for Balfour Beatty said: “We don’t comment on ongoing legal matters.” GDL declined to comment.