Levolux Ltd v Ferson Contractors Ltd (Part I)
Technology and Construction Court
His Honour Judge David Wilcox
26 June 2002
The dispute referred was the contractor's failure to make payment in respect of its interim payment application where the contractor had wrongly relied on an ineffective notice of intention to withhold payment under section 111 of the Construction Act 1996. The adjudicator decided that the withholding notice did not comply with the requirements of section 111. The contractor did not comply with the adjudicator's award for it to pay a specified sum to the sub-contractor. The sub-contractor began court proceedings to enforce the decision.
The contractor contended that it had validly determined the sub-contract in consequence of the sub-contractor having wrongfully suspended work with the result under the sub-contract that any loss or expense incurred by the contractor in completing the sub-contract works could be properly be set-off by the contractor against any sums due to the sub-contractor. The contractor relied on clause 29.8, which provided that if the contractor determined the sub-contract, all sums of money (accruing) due would cease to be due, and clause 29.9, which provided that in the event of determination, the contractor was not bound by any sub-contract provisions to make any further payment to the sub-contractor until after completion of the sub-contract works and the making good of defects
Judge Wilcox rejected the contractor’s contentions. The effect of the decision was that the contractor owed monies to the sub-contractor at the time the sub-contractor suspended the carrying out of its work with the results that the sub-contractor was entitled to suspend it work and that the contractor's purported determination of the sub-contract had no contractual effect. Clause 29.8 did not include monies due under an unimpeached decision made within the adjudicator’s jurisdiction. Also the money represented by the amount of the award was due or accruing due by way of compliance with the decision and the parties accepted under one of the sub-contract’s provisions that a decision was to be binding until the dispute was determined by arbitration or by agreement.
Judge Wilcox’s finding that the payment regime under the sub-contract in the event of it being terminated did not mean that the decision should not be enforced was upheld by the Court of Appeal.