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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Rupert Morgan Building Services (Llc) Ltd. v Jervis & Anor [2003] EWCA Civ 1563 (12 November 2003) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2003/1563.html Cite as: [2004] 1 All ER 529, [2004] WLR 1867, [2003] EWCA Civ 1563, [2004] 1 WLR 1867 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WINCHESTER COUNTY COURT
(His Honour Judge Thompson QC)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE SEDLEY
and
LORD JUSTICE JACOB
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Rupert Morgan Building Services (LLC) Ltd |
Claimant/ Respondent |
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- and - |
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David Jervis and Harriet Jervis |
Defendants/Appellants |
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Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Simon Hughes (instructed by Messrs Stitt & Co) for the Appellants
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Crown Copyright ©
Lord Justice Jacob:
"111 (1) 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.
The notice mentioned in section 110(2) may suffice as a notice of intention to withhold payment if it complies with the requirements of this section.
(2) To be effective such a notice must specify –
(a) the amount proposed to be withheld and the ground for withholding payment, or
(b) if there is more than one ground, each ground and the amount attributable to it,
and must be given not later than the prescribed period before the final date for payment."
"There was no dispute that the architect had issued an interim certificate. It therefore seems to me that the defenders became entitled to payment of the sum brought out in the interim certificate within 14 days of it being issued. In my opinion that is an entitlement to payment of a sum due under the contract. In order to reach the figure in the interim certificate one has made use of the contractual mechanism. To use the words deployed by Lord Macfadyen [in SL Timber Systems] in para. 20, the issue of an interim certificate was the occurrence of "some other event on which a contractual liability to make payment depended". This situation falls to be contrasted with the position in SL Timber Systems where, before the adjudicator, there had been no calculation of the sum sued for by reference to a contractual mechanism and which gave rise to an obligation under the contract to make payment. There had been no more than a claim by the pursuers which claim had not been scrutinised by any third party. Thus, in my opinion, if The Burrell Co (Construction Management) Ltd wished to avoid a liability to make such payment because the works did not conform to the contractual standard they would be withholding payment of a sum due under the contract. In order to withhold payment they would require to give notice in terms of s.111(1) of the Act. No such notice was given.
The interim certificate is not conclusive evidence that the works in respect of which the pursuers seek payment were in accordance with the contract (see cl. 30.10). That however does not preclude the sum brought out in an interim certificate being a sum due under the contract. The structure and intent of the Act, as I understand it, and accepted by the solicitor for the defenders, is to pay now and litigate later."
(a) It makes irrelevant the problem with the narrow construction – namely that Parliament was setting up a complex and fuzzy line between sums due on the one hand and counterclaims on the other – a line somewhere to be drawn between setoff, claims for breach of contract which do no more than reduce the sum due and claims which go further, abatement and so on.
(b) It provides a fair solution, preserving the builder's cash flow but not preventing the client who has not issued a withholding notice from raising the disputed items in adjudication or even legal proceedings.
(c) It requires the client who is going to withhold to be specific in his notice about how much he is withholding and why, thus limiting the amount of withholding to specific points. And these must be raised early.
(d) It does not preclude the client who has paid from subsequently showing he has overpaid. If he has overpaid on an interim certificate the matter can be put right in subsequent certificates. Otherwise he can raise the matter by way of adjudication or if necessary arbitration or legal proceedings.
(e) It is directed at the mischief which s.111(1) was aimed at. This mischief is mentioned in Keating. A report called the Latham report had identified a problem, namely that "main contractors were abusing their position to wrongfully withhold payment from sub-contractors who were in no position to make any effective protest." Actually the provision has gone further than just dealing with the position between main and sub contractors since it covers the position between client and main contractor too – but the main contractor will need paying himself so he can pay the sub-contractor. And he may have his own cash flow needs too. Incidentally s.109 (requiring stage payments for long contracts) is part of the same legislative policy.
Lord Justice Sedley:
Lord Justice Schiemann: