Melville Dundas Ltd v George Wimpey UK Ltd - Part I
The contractor had no valid claim for the sum certified under the JCT Scottish Building Contract where the employer terminated the contract before the final date for payment notwithstanding the employers failure to serve a notice of intention to withhold payment
22 October, 2004
The issue for determination was whether the contractor had a valid claim for the sum certified under the JCT Scottish Building Contract where the employer terminated the contract before the final date for payment and the employer did not serve to serve a notice of intention to withhold payment. Lord Clarke held that the contractor had no valid such claim notwithstanding that the employer did not serve a notice of intention to withhold payment under clause 30.3.4 where the employer terminated the contractor’s employment (by reason of its insolvency) before the final date for payment of that sum. This was on the basis that the contractual arrangements in the event of termination (whereby the employer was not required to make any further payment until the balancing exercise provided for under clause 27 had taken place) took precedence over the requirement in sections 110 and 111 of the Housing Grants, Construction and Regeneration Act 1996 for the service of an effective notice of intention to withhold payment.
The judge stated that section 111 did not subvert the contractual arrangements of clause 27 insofar as: (1) Sections 109, 110 and 111 were concerned with and direct at cash flow questions arising during the course of a continuing, non-determined contract (2) The payment provisions of the JCT Scottish Building Contract with Contractor’s Design reflected the requirements of sections 110 and 111 (3) Clause 27, on the other hand, was concerned with a quite different situation, namely where the contract had been legitimately terminated by the employer and sections 109, 110 and 111 were not intended to regulate that situation (4) The parties’ continuing freedom of contract was expressly recognised in section 109(2) and, even more significantly, section 110(1) provided that the parties were free to agree how long the period was to be between the date on which a sum became due and the final date for payment and (5) The parties were free to agree that the original date for payment of sums due under the contract could be altered in the event of the contract being terminated so that the final date for payment of the certified sum in question had not yet arrived by reason of the operation of the contractual arrangements.