Barry Trentham Ltd v Lawfield Investments Ltd
Scotland, Outer House, Court of Session
Lord Drummond Young
3 May 2002
This case involved Scottish court procedure. When the works under the building contract in question were almost complete the contractor sent to the employer an interim payment application. The contractor contended, and the employer accepted, that no notice of intention to withhold payment was issued by the employer under section 110 or 111 of the Construction Act 1996.
The contractor began court proceedings for payment of the amount of the valuation. The summons contained the usual warrant for inhibition on the dependence of the action. The use of this diligence was supported by detailed averments in the summons supporting the contractor’s case that there was a significant risk of the employer’s insolvency. The employer moved for recall of the inhibition on the ground that its continued use was contrary to the European Convention on Human Rights on the basis that the employer had adequate funds to meet the contractor’s claim if that claim were successful. In support of its motion the employer produced a substantial amount of material relating to its financial position which it contended indicated that there was no significant risk of insolvency.
Lord Drummond Young rejected the employer’s motion on the basis that there was a significant risk of its insolvency. He went on to state that the substance of the employer’s defence did not show a sufficient basis for holding that the contractor did not have a good arguable case on the merits. This defence was that the employer had served another notice of intention to withhold payment in respect of a subsequent interim payment application and that the amount to be withheld exceeded the amount of the contractor’s claim. This defence did not have merit because it was irrelevant insofar as it referred to the later application. Lord Drummond Young reached this conclusion after consideration of the decision of Lord Macfadyen in SL Timber Systems v Carillion Construction.
If a defendant wishes successfully to defend a claim for the amount included in a payment application made by a contractor, it must serve an effective notice of intention to withhold payment in accordance with the procedure set out in sections 110 and 111 of the Construction Act 1996.