Deerns UK Limited v VDC LHR11 Limited

Summary

An engineering consultant sought payment of over 910,000 pounds plus VAT on the basis that the employer's pay less notices were served late. The consultant said the contract fixed no proper final date for payment, because the final date could float depending on when the application was made, so the Scheme's default timetable applied and the notices were out of time.

The employer said the contract, properly read, did set a compliant final date, so its notices were in time. It also argued an estoppel by convention from the way the parties had operated, and asked for a stay because the consultant was said to face large cross-claims.

Mr Justice Eyre gave judgment for the consultant. The contract failed to provide a compliant final date for payment, so the Scheme applied, the final date was 17 days after the due date, and the pay less notices were late. The estoppel argument failed and no stay was granted.

Background and facts

By a consultancy agreement of 23 April 2025, VDC LHR11 engaged Deerns UK to provide engineering consultancy services for a development at Chandos Park Estate in London.

Deerns claimed 910,501.71 pounds plus VAT as the notified sums under two applications for payment, on the basis that VDC had not served pay less notices in time.

The dispute turned on the payment terms. Deerns said the contract set a due date but no final date for payment meeting section 110(1)(b) of the Housing Grants, Construction and Regeneration Act 1996, so the Scheme for Construction Contracts filled the gap. VDC said the contract did provide a compliant final date, and in the alternative relied on an estoppel by convention and sought a stay.

The issue

The court had to decide whether the contract provided a final date for payment that complied with the Act. If it did not, the Scheme applied and the final date, and the deadline for a pay less notice, followed from it. The court also had to decide the estoppel argument and the application for a stay.

The decision

Mr Justice Eyre held that the contract failed to provide a final date for payment. The contract set a final date 30 days after the due date, but that period was liable to be extended if the consultant submitted its application late, so the interval between the due date and the final date was not fixed. A contract that does not fix an identified period between the due date and the final date does not provide a final date for payment for the purposes of the Act. On the authorities on the final date for payment, in 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 gap fell to be filled by the Scheme.

He rejected the employer's argument, based on Bennett (Construction) Ltd v CIMC MBS Ltd [2019] EWCA Civ 1515, that only a piecemeal part of the Scheme should be read in. That would impose a regime the parties had not agreed. Where the contract provides no final date, the Scheme's replacement term applies:

"the final date for payment is 17 days after the due date and that the Defendant's pay less notices were out of time."Mr Justice Eyre, paragraph 92

On estoppel by convention, the judge accepted that the parties had been informal and had not always held each other strictly to the contract, but that was not enough. The assertion of a shared understanding was vague and unparticularised, and a history of informality did not amount to an agreed reworking of the payment regime:

"Such a history does not demonstrate that there was an estoppel by convention let alone one in the terms alleged by the Defendant amounting to a restructuring of the Contract."Mr Justice Eyre, paragraph 86

He also declined to defer the case for further evidence on estoppel, mindful that the purpose of the Act is to promote cash flow. On the stay, the consultant was solvent and a going concern, the cross-claims were a long way from being established, and the employer's failure to pay the sums due had contributed to the consultant's difficulties. No grounds for a stay were made out, and there was judgment for the consultant in the sums claimed.

Practical implications

Get the final date for payment right in the contract. A due date is not enough. The Act requires a final date for payment, and if the contract does not provide one that complies, the Scheme supplies it. The default is that the final date is 17 days after the due date. The deadline for a pay less notice is the period the parties agreed, here five days under the contract; where no period is agreed, the Scheme requires the notice no later than seven days before the final date.

For a paying party, this is where money is lost. If you calculate your pay less notice deadline from a contractual final date that turns out to be non-compliant, the Scheme's earlier date governs and your notice is late. When the payment terms are unusual or the final date is tied to something like an invoice, check whether they actually meet the Act before you rely on them.

Estoppel by convention will not readily rescue a late notice. A course of informal dealing, or a failure to hold the other side to the letter of the contract, does not by itself show a shared assumption that reworked the payment regime. The party asserting the estoppel must plead and prove a clear common understanding, and vague assertions will not defer a payment claim for a trial.

A stay of execution is hard to obtain against a solvent claimant. Cross-claims that are still at the level of correspondence, with no pre-action protocol letter served, will rarely justify holding back a sum that is due, especially where the paying party's own default has caused the claimant's financial pressure.

Deerns UK Limited v VDC LHR11 Limited [2026] EWHC 1509 (TCC), Technology and Construction Court, Mr Justice Eyre. Heard 5 June 2026, judgment handed down 23 June 2026.