Thomas Vale Construction Plc V Brookside Syston Ltd
Technology and Construction Court
Her Honour Judge Frances Kirkham
14 November 2006
The employer’s withholding notice was said to be served pursuant to section 111 of the Construction Act and clause 30.3.4 of JCT 98. It referred to the facts that the contractor had prepared a programme for completion of the outstanding and remedial works but had failed to make good, remedy and/or complete the work items set out in the snagging list produced by the expert in his determination pursuant to clause 1 of the supplemental agreement. It alleged that that failure amounted to breaches of clause 2 of the supplemental agreement [the contractor’s failure to use reasonable endeavours to comply with its programme for the carrying out of remedial and snagging work] and clause 16.1 of JCT 98 [the contractor’s obligation to remedy defects during the defects liability period]. It stated that the ground for withholding was that the employer was entitled to withhold a sum for the cost of making good the outstanding defects and completing incomplete work pursuant to the contract or to its common law rights. It further stated that the employer was entitled to rely on the report prepared by its surveyor after it had issued the interim certificate setting out the remaining defective and/or incomplete works.
The contractor applied for a declaration that the employer’s withholding notice in respect of the sum in the interim payment certificate it had issued was ineffective. The basis for the application was that whilst the sum withheld represented damages in respect of the cost of remedying defective and/or incomplete works, the ground relied on in the notice was that the contractor’s breaches of clause 2 of the supplemental agreement and clause 16.1 of JCT 98 and that the damages withheld therefore did not flow from the alleged breaches.
Judge Kirkham dismissed the application because (i) It was not appropriate to construe the withholding notice as nicely as the contractor sought to do or to apply fine textual analysis to a notice which was intended to communicate to the other party why a payment was not to be made and (ii) It was clear that the employer withhold payment because (as the contractor did not challenge) the contractor had not completed work or remedied defects.