Strathmore Building Services Limited -v- Colin Scott Greig t/a Hestia Fireside Design
The contractor's court proceedings should not be stayed to arbitration on the basis that he did not serve an effective notice of intention to withhold payment under section 111 of the Housing Grants construction and Regeneration Act 1996
18 May, 2000
The employer's agent wrote to the contractor stating that he was not willing to pay the balance of the contract sum unless account was first taken of the cost incurred by him as a result of the contractor's delays. The contractor sent the employer an invoice for that balance. The employer did not respond in writing to the invoice but contended that on the day he received it he telephoned the contractor's office and, on being informed that the person responsible for the contract was unavailable, left a message with the telephonist referring to the fact that the parties were already in dispute regarding further payment and to his agent's previous letter. The contractor began court proceedings for the outstanding balance of the contract sum. The employer applied for the proceedings to be stayed to arbitration. The issue for determination was whether there was a dispute for the purposes of the contractual arbitration provisions. Lord Hamilton held that the contractor's court proceedings should not be stayed to arbitration by reason of there being no dispute for the purposes of the contractual arbitration provisions on the basis that his agent's letter and telephone conversation did not constitute an effective notice of intention to withhold payment under section 111 of the Construction Act 1996. The question of whether the telephone conversation could constitute such a notice could be resolved under the contractual arbitration provisions. However, an effective such notice had to be in writing notwithstanding that the words "in writing" were not used in section 111. Crucially there was no suggestion that the sum in respect of which the contractor's invoice was issued was not otherwise "due under the contract". In addition the employer's agent's letter could not have been an effective notice of intention to withhold payment insofar as notwithstanding that it identified certain sums to be "accounted for prior to any balancing payment being made" and the basis for so doing, it did not unequivocally state that in the event of a further payment application being made, the employer would withhold payment on the basis set out in the letter. Advice Note Even though section 111 of the Construction Act does not expressly state that a notice of intention to withhold payment has to be in writing, Lord Hamilton held that it does.