Rupert Morgan Building Services (LLC) Ltd v Jervis

The builder was entitled to summary judgment for the amount certified where the homeowners failed to serve any withholding notice pursuant to section 111 of the Construction Act 1996 notwithstanding the homeowners' various defences that the builder was not entitled to the amount certified
Court of Appeal
Schiemann, Sedley and Jacob LJJ
12 November 2003
Sub-section 111 of the Construction Act 1996 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. Sub-section (2) provides that to be effective such a notice has to specify the amount proposed to be withheld, the ground(s) for withholding and the amounts attributable each ground and be given not later than the prescribed period before the final date for payment.
The homeowners did not pay the whole amount certified by the architect in an interim payment certificate but did not serve any withholding notice. They contended that they were nevertheless entitled to withhold payment by showing by way of defence that items of work which went to make up the unpaid balance were not done, were duplications of items already paid for or were wrongly charged as extras. The “narrow” construction of section 111 contended for by them (1) was roughly to the effect that if work had not been done, there could be no “sum due under the contract” with the result that there was no requirement for a withholding notice and (2) threw up questions as to whether section 111 merely prevented the raising of counterclaims or also covered matters of abatement, set off or counterclaims based on work allegedly done badly. The “wide” construction of section 111 contended for by the builder was that once it had been shown that there was a certificate and no withholding notice, the certified sum had to be paid.
This landmark decision of the Court of Appeal has finally resolved the debate in which each proposed construction has found favour with different judges. The “wide” construction was the correct one insofar as section 111 was a provision about cashflow and was not one which sought to make any certificate (interim or final) conclusive. In addition the homeowners’ contractual duty was to pay the amount certified in the absence of such a notice pending the issue of a corrective subsequent certificate or resolution of the dispute in adjudication or legal proceedings.
Advice Note
No proposed withholding by a paying party will be successful unless that party has served an effective notice of intention to withhold payment in accordance with section 111 of the Construction Act.