Hart Builders (Edinburgh) Ltd v St Andrew Ltd (Part I)

The developer that failed to serve a notice of intention to withhold payment pursuant to section 111 of the Construction should not be allowed to raise issues of defective workmanship and its alleged entitlement to liquidated damages in the contractor's action against it for an interim payment
Scotland, Sheriff of Lothian and Borders
Sheriff Isobel Anne Poole
20 August 2002
This case concerned Scottish procedural law.
The pursuer was the contractor and the defender was the developer. The contractor applied for an interim payment and when the developer refused to pay, the contractor began the present court proceedings for such a payment. The developer began separate court proceedings in respect of the contractor's standard of workmanship.
No notice of intention to withhold payment was served by the developer pursuant to the Construction Act 1996. Section 111 provides that a party to a construction contract may not withhold payment after the final date for payment of a sum due under the contract unless he has given an effective notice of intention to withhold payment. It was common ground that a pursuer in the position of the contractor had to set out a claim and the basis of the claim and could not simply rely on notice of intention to withhold payment having been served.
The developer attacked the contractor's pleadings and insisted on the dismissal of the contractor's case despite the contractor having offered to amend its pleadings if that were to be held to be necessary. The developer contended that despite not having served such a notice of intention to withhold payment, it was entitled to plead its claims against the contractor for defective workmanship and liquidated damages.
Sheriff Poole stated that there was a basis for claim set out in the contractor's pleadings, namely that there was a contract for particular works that were carried out and that an interim payment application was made. The contractor's case should not be dismissed and instead a proof before answer should be allowed to the contractor. In addition the developer's failure to serve a notice of intention to withhold payment meant that it had disabled itself from being entitled to raise the issues of defective workmanship and liquidated damages in response to the interim payment application. Advice Note The Sheriff in her decision followed the statement of Lord Macfadyen in SL Timber v Carillion Construction that a claimant must prove that a payment is contractually due even if the defendant has failed to serve a notice of intention to withhold payment.