Deerns UK Ltd v VDC LHR11 Ltd: variable final payment date triggers statutory scheme, TCC rules

The Technology and Construction Court has awarded engineering consultancy Deerns UK Limited £910,501.71 plus VAT after finding that the payment provisions in its contract with VDC LHR11 Limited failed to comply with the Housing Grants, Construction and Regeneration Act 1996.

Mr Justice Eyre delivered judgement on 23 June 2026 in Deerns UK Limited v VDC LHR11 Limited [2026] EWHC 1509 (TCC), arising from engineering consultancy services provided at Chandos Park Estate, London NW10. The central question was whether pay less notices served by VDC in respect of payment applications 7 and 8 had been issued in time.

Clause 7.2 of the contract provided for a final date for payment 30 days after the relevant due date, but also provided that if the consultant's payment application was submitted late, that date would be postponed by the corresponding number of days. The due date itself remained fixed. The practical consequence was that the interval between the due date and the final date for payment was variable, depending on when Deerns submitted its application.

Contract interpretation and compliance

Deerns argued that this arrangement fell foul of s110(1)(b) HGCRA, which requires every construction contract to provide a final date for payment. In the absence of such provision, the Scheme for Construction Contracts applies, imposing a final date of 17 days after the due date and requiring pay less notices to be served no later than five days before that date. VDC's notices, served on 27 February and 25 March 2026, fell outside those windows.

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), Eyre J confirmed that s110(1)(b) demands a fixed period between the due date and the final date for payment. A provision tying the final date to an event, rather than to the due date alone, fails to satisfy that requirement.

VDC sought to distinguish a triggering event occurring before the due date from the post-due-date mechanism condemned in Lidl. Eyre J rejected that argument, finding the timing of the triggering event irrelevant. What mattered was that the final date was made dependent on something other than the due date itself, which Parliament has prohibited. There was, the judge found, only one legitimate interpretation of the contract, precluding any resort to the principle favouring a lawful construction where two equally plausible readings exist.

Estoppel, the Scheme, and stay of execution

VDC's estoppel by convention argument, that the parties had operated the contract on a mutually understood compliant basis, was dismissed. The evidence advanced was vague and the contemporaneous documentation did not support the alleged shared understanding. The asserted convention would have required a marked departure from express contractual terms, yet no contemporaneous acknowledgement of any such departure existed.

On the Scheme's application, the court declined VDC's invitation to substitute the parties' agreed 30-day period on the basis of minimum necessary intervention. Paragraph 8 of the Scheme imposes a 17-day final date without qualification where a contract fails to provide one, and the court held it had no power to impose a different solution.

VDC's application for a stay of execution was also refused. Although the claimant's finances were under considerable pressure, VDC's cross-claims remained at an early stage and the claimant's difficulties were attributable in substantial part to VDC's own failure to pay.

Samuel Townend KC (Brabners LLP) for the Claimant. Justin Mort KC (CMS Cameron McKenna Nabarro Olswang LLP) for the Defendant.