E & TL Jones (Civils) Ltd v Vale of Glamorgan Council

Facts

The claimant, a civil engineering and groundworks contractor, was subcontracted by ISG Construction Ltd to carry out groundworks on a school extension project in Penarth for the defendant, Vale of Glamorgan Council. The Main Contract between the defendant and ISG, entered on 23 August 2023, was an amended NEC4 Engineering and Construction Contract incorporating Clause Y(UK)1, which provided for a Project Bank Account (PBA) to protect subcontractors' payments against the main contractor's insolvency. Although steps were taken towards establishing the PBA, including execution of a Trust Deed in April 2024, no subcontractor was ever proposed as, or became, a Named Supplier, and the PBA never became operational because Santander delayed completion, ultimately citing outstanding know-your-customer checks pending a proposed sale of ISG. The defendant made a series of payments directly to ISG (the Direct Payments), including sums referable to the claimant's work. ISG entered administration on 20 September 2024 without paying sums due to the claimant under the groundworks subcontract, and no recovery was expected. The claimant, not privy to the Main Contract, sued the defendant for breach of Clause Y1.8 in reliance on section 1 of the Contracts (Rights of Third Parties) Act 1999, claiming a little over £480,000. The claim was tried in the Technology and Construction Court under the Shorter Trials Scheme before HHJ Keyser KC.