Counting service days: Elements (Europe) Ltd v FK Building Ltd

This recent case Elements (Europe) Ltd v FK Building Ltd [2023] EWHC 726 (TCC) provides clarity on the meaning of the word ‘day’ as it relates to service of a payment notice within a JCT Standard Building Sub-Contract SBCSub/C 2016 Edition cl.4.6.3.1 (“JCT Contract”).

It relates to a ‘smash and grab’ adjudication where the paying party did not submit a payment notice or PLN. The paying party’s defence was that the payment application was not valid (and therefore the smash and grab must fail) because it had not been submitted within the correct timescales.

Background

The relevant chronology is as follows:

• Elements issued its Payment Application No.16 (“App16”) by email on 21 October 2022 at 10:07 pm.  
• The Interim Valuation Date was 25 October 2022.
• FK Limited failed to serve a payment or pay less notice in response. Instead it argued that App 16 was invalid as it was received late ie. at 10:07 pm, outside of site working hours.

Elements adjudicated on a ‘smash and grab’ basis and was successful.

FK failed to pay, so Elements issued court proceedings for an order for payment.

The Issues

FK argued that:

1. App16 had to be received on or before the end of site working hours on 20 October 2022 according to clause 4.6.3.1, which states App 16 had to be “… received not later than four days prior to the Interim Valuation Date for the relevant payment …”; alternatively;
2. App. 16 had to be received on or before the end of site working hours on 21 October 2022, on the basis that Clause 4.6.3.1 should be construed such that the App.16 should be received on or before the end of site working hours on whichever is the correct day to meet the reasonable commercial expectations of the parties.

Elements argued that:

1. unless provided for explicitly otherwise, 'day' simply means 'day' and should be distinguished from 'full' or 'clear' days.
2. the Sub-contract imposed no restriction on the time of day in which an Application No. 16 may be made and received.

Decision

The Judge decided App 16 was valid as it had been issued within the contract timescales. Further, the Judge clarified that the proper construction of clause 4.6.3.1 was that as it stated ‘four days prior’ then it must be done on the fourth day prior, being 21 October 2022. As there was no reference to ‘clear’ days in the Sub-contract the same could not be construed as meaning ‘clear days; when that was not the language used and, therefore,  the payment application could be made any time on 21 October 2022, up to 23:59.59, because the law did not count in fractions of a day.

Conclusion

This case provides that if a contract states an application for payment must be provided within ‘four days’ before the Interim Valuation Date which, for example, is due on 25 October 2022 then the court will count 21, 22, 23 and 24 as four days.