Tata Consultancy Services Limited v Disclosure and Barring Service

This judgment deals with a number of consequential matters following the handing down of the substantive judgment in this matter (see [2024] EWHC 1185 (TCC) (‘the Judgment’). The Judgment ran to 242 pages and dealt with a very significant number of legal, factual and technical issues. The vast majority of both claims and counterclaims were dismissed. I concluded (at paragraph 821) that, subject to VAT arguments and any applicable interest:

I am grateful to the parties for their clear and efficient written submissions, and their succinct supplemental submissions as requested by the Court. This judgment should be read together with the facts and findings set out in the Judgment, details of which are not repeated here.

Correction of Judgment

Due to the availability of the parties and the Court, the consequentials hearing has taken place a number of months after the handing down of the Judgment. DBS, in its Skeleton Argument for the consequentials hearing, pointed out for the first time that it considered that an error existed in respect of the award of delay damages for the period prior to 7 September 2018. TCS responded explaining why it considered that there was no error.

Following oral submissions, and the handing down of a draft of this judgment, TCS then provided a two page note identified what it considered was an error in the original (and, as set out below, corrected) quantification of non-manpower (and manpower) costs.

If and to the extent that an error has been made, the Court has an unfettered jurisdiction to correct it at any time before the order giving effect to the Judgment is perfected by being sealed: In re L & anr (Children) [2013] UKSC 8; [2013] 1 WLR 634 at [16], [19], and [27]:

The Order arising out of the Judgment has not been sealed. As set out below, I consider that DBS is correct and there is an erroneous internal inconsistency which affects the quantification of the damages awarded to TCS in respect of delay. It is open to me to correct the Judgment in this respect. In circumstances where there is no detrimental reliance on the part of TCS, it is obviously in the interests of justice that I do so. If the error had been pointed out in the draft judgment, I would have corrected it at that point, prior to handing down.

I consider that TCS is, however, incorrect and there is no error in the manner in which manpower and non-manpower costs have been approached. No correction is required.

I would only add that, notwithstanding the existence of discretion until the order giving effect to the Judgment is perfected by being sealed, it remains the case that parties should draw the Court’s attention to anything that it considers may amount to a substantive error capable of correction as soon as possible. An error of the type identified by DBS is readily distinguishable from a point on which a party simply disagrees and in respect of which it will, in the ordinary way, seek permission to appeal. It is perhaps unfortunate that these potential errors were not identified when the parties were provided with the judgment in draft before being handed down formally, but given the length and complexity of the Judgment it is understandable why this did not happen. The consequentials hearing was, due to the availability of the parties and the Court, not for some three months after the handing down of the Judgment. In such circumstances, it would have been far preferable if the points raised by the parties had been raised much sooner, not least because the circulation of the Judgment in relation to any points of interest increases as time goes by and a judgment should be corrected, if that is necessary, as soon as possible.

The underlying contractual regime in respect of the entitlement to loss and expense in the face of AUTHORITY Cause was that if TCS would not have achieved a Milestone by the Milestone Date in any event (even where its own delays were sub-critical) it would not get relief or compensation for the period during which it would have been in delay in any event (see [57]).

At [258] I found:

At [346(1)], I found:

The one year reflects the upper end of the 9-12 month period referred to in paragraph 258. Whilst completion in 9 months was ‘possible’ using accelerative measures, using 12 months was a conscious acknowledgment that this was the more realistic timeframe. This was also reflected in the one-year period I referred to at paragraph 397.

At [346(4)] I found:

In light of my finding at [346(1)], and the proper construction of the Agreement as set out at [57], DBS is correct that this contains an internal inconsistency. My specific finding that the assumed Go-Live Date of 7 September 2018 makes clear the factual basis upon which the legal analysis should follow. It is consistent with the factual findings/observations at both paragraphs 258 and 397.

Based on this factual finding, DBS is correct that the proper application of the contract means that TCS should not be entitled to loss and expense for the period during which it would otherwise have been working to complete the Milestone due to its own prior delays.

As a result, the Judgment should stand corrected. Paragraph 346(4) should properly read:

As a consequence:

The Court has found that critical delays to R1-D were caused by ‘AUTHORITY Cause’ from 13/06/2018. Based on the ‘artificial’ third alternative analysis at [370], TCS says that the Court has also found that DBS’s removal of scope and non-engagement could be ‘AUTHORITY Cause’ of critical delay. The Court has also found that, for period through to 07/09/2018, TCS would not have, in any event, achieved the Milestone Date and loss and expense is therefore irrecoverable until after that date. TCS contends that loss and expense in respect of R1-D should be recoverable from 07/09/2018 until the end of the Contract. Consequently, TCS’s claim, it says, should be calculated on the basis of the period from 07/09/2018 to 31/03/2020, subject to the salary data point. Inconsistently, it says, [397] of the Judgment seeks to quantify the non-manpower loss only from 07/09/2019 to 31/03/2020.

TCS’s analysis is wrong. The explanation of my approach is set out clearly in paragraph 389. The Court found that from September 2017 there was about one year of work for TCS to complete. TCS would plainly not be entitled to any losses during the time it would have been carrying out its original scope of work. There was a year of delay between September 2017 and September 2018, when Partial Termination took place. Having analysed the reasons for delay against contractual entitlement during that year, I found that TCS is entitled to 12 days’ loss and expense. TCS may then, because of the wrongful partial termination, claim losses post partial termination, but this must take account of the fact that – as at the actual date of partial termination – TCS still had one years’ worth of its own scope which it would have needed to carry out had the Agreement not been partially terminated. TCS’s proposed approach would allow it, unjustifiably, to claim for losses equivalent to the period during which it would have been carrying out its own scope but for the partial termination. This would not be permitted by Clause 7 or by the application of ordinary principles of causation. The logic of the approach in paragraph 389 is correct.

Interest on the VBSC

TCS claims interest on the VBSC of £6,976,737 which the Court awarded to TCS under the Late Payment of Commercial Debts (Interest) Act 1998 (‘the 1998 Act’). The claim is substantial; the precise figure is not clear given the lack of precision surrounding the commencement date for the calculation of interest referred to further below, but the delta between a claim at 8% over base and 2% over base (as otherwise contended for by TCS pursuant to section 35A of the Senior Courts Act 1981 (‘the 1981 Act’)) is in excess of £2m.

TCS’s claim under the 1998 Act was not pleaded. There is no suggestion that such a claim was not required to be pleaded: it plainly was, not least in accordance with CPR 16.4. This requires that if a claimant is seeking interest they must (a) state whether they are doing so under the terms of a contract; under an enactment and, if so, which; or on some other basis and, if so, what that basis is; and if the claim is for a specified amount of money (which is the case here), the pleading must state (i) the percentage rate at which interest is claimed; (ii) the date from which it is claimed; (iii) the date to which it is calculated, which must not be later than the date on which the claim form is issued; (iv) the total amount of interest claimed to the date of calculation; and (v) the daily rate at which interest accrues after that date.

TCS applied on 10 July 2024 for permission to re-amend its Particulars of Claim to plead such a claim, as well as to claim VAT. The draft amended pleading merely included the following addition:

The pleading therefore remained substantially non-compliant with the CPR at the point at which permission to amend was sought. I should add, however, that the draft pleading was provided at the same time as a letter to which was appended TCS’s interest calculations from which TCS’s case on the matters required by (i) to (v) of CPR16.4 where the claim is for a specified sum could be discerned.

The application for permission to amend is resisted. DBS contends that the application is made very late. The principles applicable to very late applications to amend were set out by Carr J (as she then was) in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm) at [36]-[38] (endorsed by the Court of Appeal in Nesbit Law Group LLP v Acasta European Insurance Company Ltd [2018] EWCA Civ 268 at [41]) and Coulson J in CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd & ors [2015] EWHC 1345 (TCC); 160 Con. L.R. 73 at [19]. As summarised at [41] of Nesbit Law:

TCS contends, in this regard, that their application should not be regarded as a ‘very late’ application on the basis that no hearing date will be lost, nor indeed any other disruption caused. Mr Cogley KC, for TCS, points to the observation of Carr J as she then was in Quah Su-Ling that ‘lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done’. On any view, this is a very late amendment. It is brought two months after the judgment has been handed down and two weeks before the consequentials hearing. The application to amend itself is being considered as part of the consequentials. Other than being brought during an appeal, it could not, by definition, be any later. That conclusion does not mean it is not, of course, necessary to consider the implications, if any, arising out of the time at which it is brought; but in the circumstances of this case, it cannot realistically be considered anything other than a very late application.

Next, DBS argues that no reason, let alone a good reason, has been identified for the lateness of the application. No evidence was submitted explaining the lateness of the application. In its skeleton argument TCS explained the lateness of the pleading by reference to its increased focus on the question of interest in the context of the consequentials hearing. On the assumption that TCS considered it was entitled to bring such a claim, this explanation amounts to no more than an acceptance that the issue had effectively been overlooked. As a reason, this is not a ‘good’ reason. This, of itself, is not determinative against the application, but it is a factor to be weighed in all the circumstances, increasing as it does the indulgence required of the Court.

DBS also raises a number of points which went to merits of the 1998 Act interest claim, which were advanced to establish either that I can conclude on this application that it has no real prospect of success at this stage (such that permission should not be granted); or alternatively conclude that evidence would be required in order to consider the merits of the claim, which is not available now and which it is now too late to have adduced, militating strongly against permitting the amendment at this stage.

These three points were (in the order in which they logically arise):

Following argument, I raised a potential interaction between Clause 16.3, which was central to the first of these arguments, and Clause 3.3 of Schedule 2-4 of the Agreement, which had not been the focus of any submissions by either party. I therefore invited short, further submissions from the parties. A fresh point was raised by DBS as to the existence of any qualifying debt for the purposes of the 1998 Act in light of Clause 3.3. TCS were given the opportunity to, and did, provide submissions in reply to this point.

DBS argues that pursuant to Clause 3.3 of Schedule 2-4, there is no obligation to pay that element of an invoice which is disputed. The obligation to pay, in respect of a disputed invoice, is limited to the undisputed amount. In these circumstances, non-payment of the disputed element does not create a debt, and there is therefore no qualifying debt for the purposes of the 1998 Act.

TCS contends that this analysis is wrong. Clause 3.3 of Schedule 2-4, it argues, sets out the immediate steps to be taken in the event of a disputed invoice. One of those steps is immediate payment of the undisputed amount. However, nothing in Clause 3.3 provides that the disputed amount is not payable; it simply recognises that the question of whether it is payable is disputed. It contends that Clause 3.3 does not say that upon a dispute, the invoice becomes invalid; rather, it says that DBS may raise a dispute and propose amendments to an invoice; if it does so and TCS accepts the proposed amendment, it then raises a “replacement” valid invoice. Absent such a replacement invoice, the position is that the invoice stands and accrues interest. TCS further submits that DBS’s construction is inconsistent with Schedule 2-9 (the Dispute Resolution Procedure) which is drafted on the premise that ‘the parties shall continue to comply with their respective obligations under the Agreement regardless of the nature of the Dispute and notwithstanding the referral of the Dispute to the Dispute Resolution Procedure’ (Clause 1.3) and the ability to commence or continue litigation or arbitration proceedings (Clause 3.20). TCS asks rhetorically, on DBS’s construction, from what point does interest begin to run after the dispute? The Dispute Resolution Procedure is silent on this issue. TCS contends that the answer must be the date that the invoice should have been paid absent the dispute (i.e. 30 days from invoice).

If, contrary to this, Clause 3.3 of Schedule 2-4 operates so as to remove the payment obligation in respect of disputed invoices, such that they are not “qualifying debts”, then TCS contends that the provision is void. That is because the process that is engaged when an invoice is disputed provides for no payment of any interest. TCS argues that Section 8 of the Act cannot be circumvented by providing that disputed debts are non-payable, any more than it can be circumvented by providing for applicability of the Act in relation to undisputed debts (Clause 16.3); in both cases, the substantive position would be the same – namely, no remedy for a sum due by way of charges under the contract.

A debt arises where a contractual obligation to pay is not met. The existence of a debt is necessary for there to be a qualifying debt which engages the 1998 Act, pursuant to Section 3 which states:

The starting point of the analysis is therefore, by definition, to identify what the obligation upon DBS to pay a valid invoice submitted by TCS is. The obligation to make payment in consideration of the services provided by TCS is set out in Clause 16.1:

Clause 16.3 of the Agreement then states:

Clause 3.3 of Schedule 2-4 (Invoicing) of the Agreement states:

The obligation to ‘pay all valid invoices’ in Clause 3.1 is qualified by the words which follow it: ‘in accordance with the provisions of this Schedule…’. Clause 3.3 of the Schedule deals specifically with what happens if an invoice is disputed. If any element of a valid invoice is disputed, the express obligation to make payment attaches only to any undisputed amount. The disputed amount is then dealt with by the procedure which follows, and in turn the Dispute Resolution Procedure under Clause 27. There are simply no words to give rise to a contractual obligation to pay the disputed part of an invoice. TCS argues that nothing in Clause 3.3 provides that the disputed amount is not payable, but this is the wrong way round: nothing in Clause 3 provides that DBS is obligated to pay the disputed element of an invoice, in clear contradistinction to the express obligation to pay the undisputed element. TCS is right that the invoice does not suddenly become ‘invalid’ – it is just that there is no contractual obligation to pay the invoice unless it is, or it becomes, ‘undisputed’. This is not inconsistent with Clause 1.3 of Schedule 2-9 because this merely provides that the parties must continue to comply with their obligations. It is therefore necessary to consider what those obligations are, and this returns to Clauses 3.1-3.3. Clause 1.3 of Schedule 2-9 is entirely neutral on what the parties’ obligations are.

The outcome of the Dispute Resolution Procedure will mean, by agreement or determination, a sum does or does not become ‘undisputed’. Once it becomes ‘undisputed’ the contractual payment obligation under Clause 3.1 operates (unless varied by the terms of any settlement or determination) to require payment in accordance with Clause 3.1 of Schedule 2-4, and pursuant to Clause 16.3, the 1998 Act interest will run at that point to the extent the obligation to pay is not met, and a debt is created.

‘Disputed’ has, as TCS correctly contends, an ordinary and natural meaning. However, it may be that, implied into Clause 3.3 of Schedule 2-4, is a requirement that a ‘dispute’ be a ‘genuine’ or ‘bona fides’ one. Indeed – although it is not necessary for me to decide on the facts of this case – possibly even a ‘reasonable’ one. The language I use in the remainder of the Judgment is not intended to preclude this being the proper construction: in some cases (albeit not this one) it may be an important distinction.

This construction does not ‘oust’ the Act. In conjunction with Clause 16.3, the 1998 Act only applies to ‘undisputed’ sums because there is no obligation to pay a disputed sum, pursuant to the procedure in Clause 3.3 of Schedule 2-4. In the absence of an obligation to pay, non-payment cannot create a ‘debt’, and there is no qualifying debt for the purposes of Section 3 of the 1998 Act. There is no avoidance of the payment of interest on a qualifying debt because there is no qualifying debt. In any event, even if I am wrong about this, for the reasons I set out further below, I consider that an overall remedy which seeks to distinguish between sums that are undisputed and those which are disputed for the purposes of the application of the 1998 Act is nevertheless a ‘substantial’ remedy.

Whether the invoices relevant to the sums in issue in this case were ‘disputed’ for the purposes of Clause 3.3 (triggering the contractual right not to pay) is a question of fact. TCS relied, in its argument before this point arose, upon its notification of the entitlement to charge 1998 Act interest on invoices by reference to a letter dated 31 July 2018, in which Mr McCarthy of TCS identified ‘Overdue Invoices’ which were all more than 30 days overdue. The letter said:

This elicited a response from DBS that:

Mr Croall asserted, and it was not disputed, that TCS did not respond to this letter. I consider that this letter, contrary to Mr Cogley’s submissions, was plainly seeking to engage the contractual distinction between ‘disputed’ and ‘undisputed’ amounts for the purposes of Clause 3.3 of Schedule 2-4, and by implication the claim for interest under Clause 16.3, which TCS themselves had specifically raised - rightly or wrongly - as the basis to their entitlement to interest under the 1998 Act. On 7 September 2018, BCLP on behalf of TCS proposed that the Dispute Resolution Procedure in respect of the Charges Variation Dispute be waived and Bristows, on behalf of DBS, consented to this. The Charges Variation Dispute included the Clause 2.8.8 issue.

On the basis of the limited evidence before me on this application to amend, it is likely that the parties were operating on the basis that those elements of the invoices which were not being paid because of the parties’ known differing positions on the proper construction of the contract relating to the VBSC were ‘disputed’ for the purposes of Clause 3.3 of Schedule 2-4. This being the case, there was no obligation upon DBS to pay the sums and there is therefore no qualifying debt to which the 1998 Act applies. It follows that TCS is not entitled to 1998 Act interest.

Insofar as the factual position is, in reality, more complicated in relation to whether or not the invoices were ‘disputed’ then it is a matter which would require further witness evidence and the potential exploration of that evidence by cross-examination. It is now too late for that. The need for further evidence relating to whether or not an obligation to pay arose would be a decisive reason, at this late stage and in the absence of any good reason, to refuse the application to amend.

That is sufficient to deal with the 1998 Act issue, but in deference to the remainder of the arguments advanced by the parties, I consider them further below.

This argument proceeds on the basis that, contrary to my conclusion above, disputed elements of invoices remain payable so as to give rise to a qualifying debt for the purposes of the 1998 Act.

Sections 8 and 9 of the 1998 Act deal with the circumstances in which it is possible to oust or vary the Act. The present case is not one where it is said to be ousted: instead it is said to be varied insofar as it is limited to debts which are ‘undisputed’. This, it is said, must implicitly be read as disapplying the 1998 Act to those debts which are disputed on a bona fides basis.

Sections 8 and 9 of the 1998 Act relevantly state:

There is little authority on the application of sections 8 and 9 of the 1998 Act. One authority which DBS drew to the Court’s attention is the decision of Edwards-Stuart J in Yuanda (UK) Co Ltd v WW Gear Construction Ltd [2010] EWHC 720 (TCC); [2011] Bus LR 360. In that case, the learned Judge was required to consider whether a substantially lower interest rate than the statutory rate (of 8%) meant that there was not a substantial remedy. Notwithstanding the different underlying facts, of some interest in the present context is the Judge’s general remarks about the factors which ought to be borne in mind in the necessary analysis, as set out at [87] and [88]. Edwards-Stuart J said:

In the Banham case, referred to in the extract above, Eady J considered the circumstances in which the Section 5 remission might apply. In doing so, he identified the relevance of the distinction, also drawn by Edwards-Stuart J, between what might be described as conscious non-payment of sums known to be due and owing, and those which are the subject of legitimate dispute. The judge observed:

The distinction, again being drawn in the specific context of remission under Section 5 of the 1998 Act rather than the test under Section 8, is echoed by the Court of Appeal in Ruttle Plant Hire Ltd v Secretary of State for the Environment, Food and Rural Affairs [2009] EWCA Civ 97; [2010] 1 All ER (Comm) 444. At [38], Jacob LJ considered the position where the supplier may overclaim by a large amount. The Judge said:

As indicated by Eady J at [72] in the extract at paragraph 47 above, whilst containing the discretion to remit the application of interest, there is no wording in the 1998 Act which permits the conclusion that the statutory interest regime is not to apply at all in cases of bona fide dispute. Nevertheless, each authority recognizes in slightly different ways the existence of an important distinction between awarding interest on a sum that is disputed, whether as to liability or as to amount, and awarding interest on a debt in respect of which there is no room for reasonable dispute. When construing the 1998 Act, it is relevant therefore to bear this distinction in mind, and that the principal mischief the statute aimed to deter was the non-payment of debts which were due – to coin Jacob LJ’s phrase – ‘on any view’.

Mr Croall accepted that the 1998 Act applied to genuinely disputed debts. Nevertheless, Mr Croall contends that by Clause 16.3, the Agreement has limited the application of the statute to those sums claimed to those which are undisputed, by which he means are not the subject of a bona fide dispute. As a matter of construction of the Agreement, it is correct that by stating that the 1998 Act would apply to ‘undisputed’ invoices, the effect of Clause 16.3, by implication, is to (seek to) disapply the 1998 Act to ‘disputed’ invoices.

In my view, it is no coincidence that Clause 16 refers to Schedule 2-4 (Invoicing Procedure), at Clause 16.1; and that Clause 3.3 of Schedule 2-4 refers back to Clause 16. Clause 3.3 specifically deals with a ‘disputed’ invoice, and requires the Authority to make payment of any ‘undisputed’ amount in accordance with Clause 16. It requires the reason for non-payment to be identified, and for the Contractor to indicate whether those reasons are accepted. If it does, it supplies a replacement invoice; if not then the matter is to be dealt with in accordance with the provisions of Clause 27. Clause 27 is the Dispute Resolution Procedure, and cross-references to Schedule 2-9.

It is therefore clear that the word ‘undisputed’ in Clause 16.3 should be construed in the context of the words ‘undisputed’ and ‘disputed’ in Clause 3.3 of Schedule 2.4. If the AUTHORITY does not follow procedure within Clause 3.3, the mere non-payment of part of an invoice does not mean that the sum is ‘disputed’. If a sum is to be ‘disputed’ for the purposes of implication within Clause 16.3, the procedure in Clause 3.3 of Schedule 2-4 needs to be followed. Otherwise, it is ‘undisputed’ for the purposes of the application of the 1998 Act.

On any view, and irrespective of my view of the precise meaning of ‘undisputed’ and its implied opposite within Clause 16.3, the construction for which Mr Croall contends is one in which the contractual remedy for late payment of debts (assuming a debt exists in relation to the disputed element of an invoice) is clearly of a narrower ambit than the regime within the 1998 Act. The central question is, therefore, whether the clause is void pursuant to Section 8 of the 1998 Act. Mr Croall contends that, by permitting interest on debts which are undisputed, even though the Section excludes the debt from the regime if it is disputed, the overall remedy nevertheless remains a ‘substantial’ remedy for the purposes of Section 8.

Against this, Mr Cogley submitted that the ‘qualifying debt’ to which the 1998 Act relates is one which may by definition be or include a debt in respect of which there is a bona fide dispute. In respect of this, he is undoubtedly correct. Moreover, he is also correct that there is no other contractual provision for interest (applying a lower rate to such disputed debts, for example) under the Agreement for payment of interest on a disputed debt once resolved. By excluding such a debt from the ambit of the contractual regime altogether, Mr Cogley argued that the Agreement was not providing a substantial remedy in respect of late payment of that particular category of debt, namely a disputed debt. To use Mr Cogley’s phrase, the position in relation to disputed debts was left in vacuo. This, he said, drove a coach and horses through the 1998 Act and the logic which has been applied to it within the authorities referred to above. The disapplication of statutory interest to disputed debts therefore falls foul of Section 8 of the 1998 Act and is void.

I was initially attracted to Mr Cogley’s submission. However, upon careful reflection, I consider that this conclusion is wrong for a number of reasons.

The starting point is that, subject to Section 8, the parties are free to agree contract terms which deal with the consequences of late payment of the debt. Section 8(3) is predicated on the basis that the right to statutory interest may be varied by agreement providing that the remaining ‘overall remedy’ is a ‘substantial remedy’.

‘The debt’ referred to in Section 8(3) of the 1998 Act is the sum of money owing pursuant to a particular demand for payment (providing it is a qualifying debt). It may or may not be disputed. It is wrong to pre-define, when considering whether the overall remedy in respect of that debt is a substantial one for the purposes of Clause 8(3), ‘the debt’ as a ‘disputed debt’ and then ask ‘is there a substantial remedy in relation to a debt which is disputed?’: this necessarily produces the answer ‘no’, but the answer is the product of asking the wrong question. The correct question is, rather, to ask whether an overall remedy agreed by the parties which limits the application of statutory interest to situations where the debt is (genuinely) disputed is ‘a substantial remedy for late payment of the debt’.

I then turn to answering this question in stages: is a clause which provides for interest to be paid in respect of the qualifying debt in certain circumstances but not in others nevertheless an ‘overall remedy’ in respect of that debt? The answer to this question is undoubtedly yes: there is plainly a remedy provided, even though that remedy is more limited than the statutory remedy in that it does not apply in all circumstances. An analogy might be the insertion of a contractual provision that requires the supplier to provide a notice, upon non-payment of an invoice within the relevant period, that the supplier will charge the statutory interest, and that in the absence of such a notice the supplier’s right to statutory interest is lost. There is still a remedy in this case, even though the statutory regime is varied so that it is disapplied in certain circumstances.

The critical question is then, whether the overall remedy, narrower though it may be than the statutory scheme, is nevertheless a ‘substantial’ remedy. To answer this question one must look to Section 9(1).

The starting, or default, position is that ‘a remedy’ is to be regarded as substantial unless Section 9(1)(a) and (b) apply. By reason of the conjunction ‘and’ both Section 9(1)(a) and (b) must be established to avoid the presumption that the remedy will be a substantial remedy.

Section 9(1)(a) asks whether the remedy is insufficient either for the purpose of compensating the supplier for late payment or for deterring late payment. It is clear that, in a strict sense, removing the right to statutory interest when the debt is genuinely disputed means, in those specific circumstances, there is no (contractual) remedy by way of interest to compensate the supplier for payment which – if the dispute is resolved against the non-payor – will be retrospectively seen as ‘late’. There will of course always be the discretion to allow pre-judgment interest at an appropriate rate pursuant to Section 35A of the Senior Court Act 1981, but this is not relevant to the consideration of sufficiency under section 9(1)(a) (although this will be relevant under 9(1)(b)). The first relevant insufficiency, therefore, exists.

As to the second, is the overall remedy insufficient ‘for deterring late payment’. In this context, it is necessary to consider what is meant by deterrent. As stated clearly by Eady J, and echoed in the substance of the other authorities, the mischief to which the statute appears to be primarily directed is that of casual or feckless non-payment. Indeed, the ‘deterrent’ element of the 1998 Act could never sensibly be seen as seeking to ‘deter’ a genuine legal dispute, even though the Act is wide enough to catch late payment of debts in respect of which there are such disagreements. Seen through this lens, the modified application of the 1998 Act regime agreed by the parties within Clause 16.3 is clearly sufficient to continue to provide the relevant deterrent, namely against non-payment of sums which are due – to repeat Jacob LJ’s phrase – ‘on any view’.

Thus, there may be a partial insufficiency for the purposes of Section 9(1)(a). It is necessary then to consider Section 9(1)(b).

As to Section 9(1)(b):

Balancing all these factors, I consider that it is fair and reasonable to allow two sophisticated contracting parties to agree freely within their contract to an overall remedy in respect of the late payments of debt which varies the statutory regime which would otherwise apply so as to disapply it to disputed debts. A key consideration is the distinction the Courts have readily drawn between those who choose not to pay their outstanding debts and those who refuse to pay because of a genuine legal dispute, and the fact that Clause 16.3, whilst varying the application of the 1998 Act, still provides the important deterrent against the mischief the statute was primarily directed towards, namely the non-payment of debts known to be due.

As such, the requirement of Section 9(1)(b) is not met, and the remedy for the late payment of the debt shall be regarded as a substantial remedy. It is not voided by Section 8.

It follows that I accept, as Mr Croall submitted, that in light of Clause 16.3, the claim for interest pursuant to the 1998 Act in respect of debts which were not paid by reason of the existence of a (in this case, both genuine and reasonable) dispute about the proper construction of the Agreement has no reasonable prospect of success and should not be permitted on amendment.

Section 4 of the 1998 Act provides that, in the absence of an agreed date for payment of the debt, interest does not start to run until the purchaser has notice of the amount of the debt, or the sum which the supplier claims is the amount of the debt (see Sections 4(2A) and 4(2H)). There was no agreed date for payment of the sums which TCS have been awarded. DBS contended in written submissions that DBS was never asked to pay a debt in the sum awarded to TCS at any stage prior to the Judgment on account of the fact that the sums requested by invoice included other sums. As such, it argued that interest had never started to run.

This argument was unsustainable in light of Jacob LJ’s decision in Ruttle, in which he made clear that the fact of an over-claim by way of invoice or demand does not prevent that invoice or demand from being notice to commence interest running (although the over-claim may be relevant to the question of remission under Section 5 of the 1998 Act). At [30] Jacob LJ said:

It is not correct, therefore, that the fact that the invoices represented ‘over-claims’ means that there was no proper notice by which interest would start to run.

It is nevertheless necessary, of course, to identify the date from which such interest is to run. Mr Croall had taken the point that this was not pleaded, nor clear on the evidence. In light of the way the invoices had been submitted and the way that their expert had ‘smoothed’ the invoices which underlay the interest calculations, Mr Cogley in oral submissions was unable to point to the precise date upon which the first demand for the purposes of satisfying the 1998 Act was given. Nevertheless, he submitted, correctly, that the relevant requirements of the 1998 Act would be met by identifying a ‘not later than’ date, by which, conservatively, it could safely be concluded that the relevant demand (by reference to the preceding invoices) had been made. This approach was not disputed by Mr Croall. The ‘not later than’ date contended for in oral submissions was 22 April 2019. I would have accepted, had there been a qualifying debt and/or had the 1998 Act applied unmodified, that interest had started to run from not later than this date.

Section 5 of the 1998 Act provides that statutory interest shall not run for a period where, by reason of the conduct of the supplier, the interests of justice require that the supplier should receive no statutory interest for that period. As developed in oral submissions, Mr Croall contended that the interests of justice required that TCS should receive no statutory interest, by reason of the conduct of the supplier, where:

Mr Croall acknowledged that this was akin to an estoppel, in circumstances where (against the existence of Clause 16.3, valid or invalid), both parties appeared to be operating after the exchange of letters on the basis that the relevant parts of the invoices were validly ‘disputed’ in accordance with the contractual procedure, and were not therefore ‘undisputed’ for the purposes of the application of the statutory interest. In line with the fact that no claim was advanced under the 1998 Act for the duration of the litigation (and over six years from the correspondence referred to above) and on the basis of the very limited evidence before the Court on this application, that is not, in my judgment, an improbable proposition of fact.

Mr Croall also submitted that, had TCS not intimated that its claim for statutory interest related to undisputed invoices (as opposed to unpaid invoices, whether disputed or not), DBS may have decided to pay the disputed invoices without prejudice to their legal rights so that they were not in danger, if the dispute was resolved against them on the proper meaning of the contract, of paying a penal interest rate.

Mr Cogley complains that this is speculation or hypothesis. He is obviously right that there is no direct witness evidence before the Court about whether DBS were in fact operating on this basis, or what they would have done differently, if anything, had they not been.

However, in the context of an application to amend after trial in relation to a matter in which, had it been pleaded, DBS would have been entitled to invoke a defence which involved a factual investigation, the absence of evidence from DBS does not assist Mr Cogley. Instead, it demonstrates the potential for prejudice by allowing the amendment at this stage. Against any claim for statutory interest under the 1998 Act, the defending party would plainly be entitled to raise the issue of remission under Section 5. In this case, even on the basis of the limited correspondence before the Court, I consider that DBS would have been entitled to plead and explore in evidence questions which could properly impact what ‘the conduct of the supplier’ amounted to and how, in light of that, the interests of justice would properly be served for the purposes of remitting statutory interest.

Taking into account the potential prejudice in allowing the amendment at this stage, together with the timing of the application and the absence of good reason for the very late amendment, I would – even without consideration of the prospects of success considered above – have declined to exercise my discretion to permit the amendment.

I decline the invitation from Mr Cogley, in circumstances where I have refused to permit the amendment to claim 8% over base as interest under the 1998 Act, nevertheless to allow a claim for interest at the same rate under section 35A of the 1981 Act. There is no basis upon which it would be remotely appropriate to do so in relation to the non-payment of legitimately disputed invoices.

The remaining question is whether the rate should be 2% (as contended for by TCS) or 1% (as contended for by DBS). DBS contends that in relation to commercial claimants, the general presumption will be that they would have borrowed less and so the court will have regard to the rate at which persons with the general attributes of the claimant could have borrowed. This is, DBS contends, likely to be a percentage over base rate and may be higher for small businesses than for first class borrowers.

TCS contends that a rate of 2% has been held to reflect normal practice in the TCC (Fluor v Shanghai Zhenhua Heavy Industry Co. Ltd [2018] EWHC 490 (TCC) at [56]).

I consider that 2% over base is consistent with general practice in the TCC and, as indicated at 16AI.7 of the White Book, there are a number of authorities which demonstrate that this approach is common.

As to the amount upon which pre-judgment interest is to be awarded and from what date, I consider this further below in the context of interest on the CCN 041 Counterclaim.

DBS’s position is that interest should run on the sum of £4,559,439, from 9 February 2016, which is the date which, on the parties became estopped from denying that TCS would pay DBS the sum on account of previous delays. Mr Croall contends that it follows that from around 9 February 2016, DBS was entitled to the benefit of the sum of £4,559,439 from TCS to compensate DBS for the previous delays. The alternative way of putting it is that DBS is entitled to interest from the dates of invoices against which credit should have been given by TCS.

Mr Cogley contends that the correct date for interest is that of the Judgment itself. He says that there was no debt (as found in the Judgment) and the sums were not claimed or proven as damages. Rather, in February 2016, TCS offered a compromise amount (on a commercial basis without admission of liability), subject to agreement of a CCN and the payment mechanism. As found in the Judgment, no such agreement was ever finalised. No credit notes were sought by DBS and it did not deduct any sums either. For a claim to be made pursuant to section 35A of the 1981 Act, there needed to be a cause of action in respect of these sums, and none was pleaded against TCS: instead, the entitlement to the sum by way of a credit was admitted by TCS within the pleadings.

I consider it would be inconsistent with my findings in the Judgment to permit DBS to claim interest on £4,559,439 in circumstances when there was, as I have found, no failure to pay the sum as at the date of the Amended Defence. I also accept that the DBS’s pleaded claim for damages at paragraph 65 to 67 does not, read fairly, in fact relate to damages arising from the underlying matters giving rise to the entitlement to compensation, but to the ‘failure to pay’ which I concluded did not exist. The pleaded damages claim does not therefore capture a basis upon which an entitlement to pre-judgment interest under Section 35A could attach.

However, it does not follow that I must ignore the fact that TCS has accepted that the sum of £4,559,439 was to be set off against its entitlements otherwise secured as owing to them in this litigation. By reference to its delay claims and to the VBSC, it has established an entitlement, on which it seeks payment of pre-judgment interest pursuant to section 35A of the 1981 Act. I have decided that the appropriate rate is 2%. However, it would be obviously unjust for interest to accrue in TCS’s favour prior to the sum which needs to be set off in DBS’s favour having effectively been ‘paid’. Thus, the £4,559,439 owed to DBS should be set against TCS’s accruing entitlement (whether in respect of delay related damages or the VBSC), and when the set off is exhausted, TCS will then be entitled to pre-judgment interest at 2% over base on the balance (or, if appropriate, on the balance as it further accrues) from that point only.

The sums sought in the pleadings were not said to be sought subject to applicable VAT. The sum sought in closing submissions was said to be plus applicable VAT (although no amendment to the pleadings was sought at that time – or point taken by DBS about the recoverability of VAT without such an amendment). DBS does not dispute that there is both a contractual and a statutory requirement for sums to be charged by TCS on its Charges (including those subject to the Court’s order in due course). DBS’s only point is that entitlement to VAT is not pleaded, and the amendment to plead VAT is very late, and there is no good reason for its lateness.

In contrast to the question of interest under the 1998 Act, it is plain that notwithstanding the lateness of the amendment, there is no conceivable prejudice to DBS and none is advanced. It is in accordance with the overriding objective to permit the amendment and the sums ordered to be paid will be subject to payment by DBS of the applicable VAT.