Payment in the construction industry - latest case on the calculation of the final date for payment

The recent Deerns UK Limited v VDC LHR11 Limited [2026] EWHC 1509 (TCC) judgment confirms that the final date for payment must be a fixed period, calculated from the due date with no provision to vary or extend the final date.

Facts

VDC engaged Deerns to provide engineering consultancy services. Deerns sought payment exceeding £900k plus VAT alleging VDC’s failure to serve timely Pay Less Notices in respect of two applications for payment.

In the contract between the parties, the due date for payment was fixed but the final date for payment was 30 days after the relevant due date “save that if the Consultant (Deerns) invoice is issued late, the final date for payment shall be postponed by the same number of days by which the Consultant’s invoice is late”. The contract went on to state that if VDC intended to pay less than the Notified Sum, “VDC shall not later than five days before the relevant final date for payment” serve a Pay Less Notice.

VDC’s case was that the Pay Less Notices were served in time, in accordance with the contract terms in that they had been served not later than the contractual period of five days before the final date for payment (which they claimed was contractually 30 days from the due date).

Deerns’s case was that the contract did not provide a final date for payment as required by s110(1)(b) of the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”) because the contractual provisions did not give certainty as to that date.

Deerns argued that due to the lack of certainty regarding the final date for payment, the relevant provisions of the Scheme for Construction Contracts (England and Wales Regulations 1998 (“the Scheme”) applied. The Scheme provides that the final date for payment is 17 days from the date that payment becomes due (see section 8 of the Scheme). 

Deerns’s case was that the Pay Less Notices were invalid and that VDC had served them too late since they not served  no later than five days before the final date for payment (because on its case the final date for payment was 17 days, not 30 days after the due date).

Judgment

The Technology and Construction Court (TCC) gave judgment in favour of Deerns and confirmed that a contract which does not provide for an identified and fixed period between the due date for payment and the final date for payment fails to provide for a final date for payment for the purposes of s110(1) of the Construction Act. Any contractual provision that allows the final date for payment to be extended or postponed after the due date is therefore invalid.

The TCC in its judgement referred to Rochford Construction Ltd v Kilhan Construction Ltd [2020] EWHC 941 and Lidl Great Britain Ltd v Closed Circuit Cooling Ltd, as well as the purpose of the Construction Act, which “was to provide for certain minimum, mandatory standards so as to achieve certainty and regular cash flow”.

Additional arguments raised by counsel for VCD on estoppel and application for a stay of execution were also unsuccessful. Since the relevant clause was invalid and the Scheme applied, it was determined that VDC had served the pay less notices out of time (since they had not been served a certain of days before the 17 day timeframe for the final date for payment set out under the Scheme) and Deerns was successful in its application for the outstanding payments exceeding £900k plus VAT.

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