The recent Technology and Construction Court decision in Deerns UK Limited v VDC LHR11 Limited [2026] EWHC 1509 (TCC) serves as a timely reminder of the importance of carefully drafted payment provisions in construction contracts.
The dispute arose under a consultancy agreement which provided for payment 30 days after the due date, but also stated that where the consultant submitted its payment application late, the final date for payment would be postponed by the same number of days. The consultant argued that this mechanism failed to comply with section 110 of the Housing Grants, Construction and Regeneration Act 1996 because the final date for payment could vary independently of the due date.
The court agreed. Following the reasoning in Rochford Construction and Lidl Great Britain, the court held that the period between the due date and final date for payment must be fixed. A contractual provision allowing the final date to move by reference to another event, even one occurring before the due date, is non-compliant. As a result, the relevant provisions of the Scheme for Construction Contracts applied, shortening the final date for payment to 17 days after the due date. The employer's pay less notices were therefore served late and were ineffective. The consultant was therefore successful in its claim for over £910,000 plus VAT.
Key lessons
- The final date for payment must be ascertainable by reference to a fixed period following the due date.
- Seemingly innocuous provisions dealing with late invoices or payment applications may render an entire payment regime non-compliant.
- Where payment provisions fail to comply with the Act, the Scheme may apply with significant consequences such as leaving the paying party open to a ‘smash and grab’ adjudication.
For employers, contractors and consultants alike, the decision underlines the value of reviewing payment mechanisms carefully. A drafting provision intended to protect against late applications can ultimately create the very payment risk it was designed to avoid.
How we can help
Our Construction Disputes team advises employers, contractors and consultants on payment provisions, construction contracts and disputes arising under the Construction Act.
If you have any queries about payment mechanisms, pay less notices or the implications of this decision for your contracts, please contact Ryan McCuaig or a member of our Construction Disputes team.