Melville Dundas Ltd v George Wimpey UK Ltd - Part III

The contractor had no valid claim for the payment admittedly due to it under JCT 98 With Contractor's Design where the employer terminated the contract after the final date for payment notwithstanding the employer's failure to serve a notice of intention to withhold payment
 
 

The contract incorporated JCT 98 With Contractor’s Design. The issue for determination was whether the contractor had a valid claim for the interim payment admittedly due to it under JCT 98 where (1) the contractor had a receiver appointed to it and (2) the employer determined the contractor’s employment on the ground of insolvency but only after the final date for payment and without giving any notice of intention to withhold payment under section 111(1) of the Construction Act 1996. Clause 27.6.5.1 provides that in the event of the employer determining the contractor’s employment (1) the provisions of the contract which require any further payment or any release or further release of retention are not to apply but (2) the clause is not to be construed so as to prevent the contractor’s enforcement of any of its contractual rights in respect of amounts properly due to be paid by the employer to the contractor which accrued due 28 days or more before the date on which the employer could first have given notice to determine the contractor’s employment. The contractor conceded that if the provisions of clause 27.6.5.1 were to be applied, they had the effect that the interim payment was no longer payable to it insofar as (1) it became due less than 28 days before the administrative receiver was appointed to it and (2) the date of the appointment was when the employer could first have given notice to determine the contractor’s employment.

 

The House of Lords held (by a 3:2 majority) that the contractor did not have a valid claim and that the employer was not required to give an effective withholding notice in the circumstances. This was on the basis that clause 27.6.5.1 should be applied by reason of that clause not conflicting with the statutory requirements as to the terms which the contract should contain and not contravening the statutory requirement for giving an effective withholding notice. The employer could not have served an effective notice of intention to withhold payment under section 111(1) with the result that to make clause 27.6.5.1 subject to the notice requirement of section 111(1) would be in effect to have written it out of the contract.
 

Download