Overpayments – Can you recover the money? Apparently not. Read on…

Man reading paper

Following the recent decision in Graham Leslie v Farrar Construction Ltd [2016] EWCA Civ 1041 we thought it would be useful to recap on the facts of the case and highlight the warning that the decision brings.

So what happened…?
Mr Leslie and Farrar Construction entered into an oral Framework Agreement in which the parties would collaborate in the development of five separate sites.

The Framework Agreement provided that Farrar Construction would be paid its “build costs” (which were not defined) and the parties would split the profit made when each site was sold on the open market.

Throughout the course of the developments; Farrar submitted applications to Mr Leslie for round sums which did not include detailed substantiation. Mr Leslie accepted the sums on the basis they were in line with the agreed budgets.

Following completion, the profits were agreed and shared without any further substantiation being provided.

Over time the relationship deteriorated and Mr Leslie sought to recover what he deemed to be overpayments.

Decision One…

The court of first instance held that an employer could not recover overpayments which it made at the Contractor’s request without further investigation.

The Court of Appeal Decision…

The Court of Appeal upheld the decision.

The Lesson…

This case serves as an important warning. Where a payment is made against an application without further enquiry; the Employer will lose the right to challenge the sum later. Consider the application carefully at the time to ensure sums applied are correct.

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