Melville Dundas Ltd v George Wimpey UK Ltd - Part II
The contractor was entitled to the certified interim payment under the JCT Scottish Building Contract where the employer failed to serve any notice of intention to withhold payment before the employer terminated the contractor's employment and before the final date for payment
15 December, 2005
The issue for determination was whether the contractor had a valid claim for the interim payment certified as being due to it under the JCT Scottish Building Contract (“the JCT Form”) where the employer terminated the contract by reason of the contractor’s insolvency before the final date for payment and the employer did not serve an effective notice of intention to withhold payment.
The Inner House of the Scottish Court of Session overturned the decision of the judge at first instance in the Outer House and held that the contractor did have a valid claim. The Inner House came to this conclusion on the basis that the true construction of the relevant provisions of the JCT Form permitted the employer in certain circumstances to withhold an amount due after the final date for payment but not retrospectively to alter the final date for payment. This meant that the provisions dealing with the withholding of payment in sections 109 to 111 of the Construction Act continued to apply even after the termination of the contractor’s employment.
In giving their detailed reasons the Inner House stated that even if the Act permitted it, there would have had to have been a very clear contractual provision to have the effect of retrospectively altering the final date for payment and of depriving the contractor of a right which had already accrued to enforce immediate payment. The obvious difficulty in seeking to impose relevant provisions of the JCT Form contended for by the employer was that it was impossible to discover from them what the final date for payment would be and, indeed, it might never arrive. This conclusion was consistent with the view that section 111(1) was about cash flow and it was a relevant consideration that it was inevitable that where a contractor became insolvent, there would not be enough money to go round and losses would have to be borne. Parliament provided quite clearly by section 111(1) that where in the circumstances of the instant case the contractor became insolvent, the losses should be borne by the employer.