Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd 2004

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE CLARKE,The President or Vice-President,MR JUSTICE NEUBERGER,LORD JUSTICE BROOKE,Lord Justice May,Lord Justice Rix,Lord Justice Hooper
Judgment Date17 March 2005
Neutral Citation[2005] EWCA Civ 291,[2004] EWCA Civ 1757
Date17 March 2005
Docket NumberB2/2004/0997,Case No: A1/2004/2246

[2004] EWCA Civ 1757





Royal Courts of Justice


London, WC2


Lord Justice Brooke

(Vice President of the Court of Appeal, Civil Division)

Lord Justice Clarke

Lord Justice Neuberger


Collins (Contractors) Limited
Baltic Quay Management (1994) Limited

MR J ROBSON (instructed by Thackery Williams) appeared on behalf of the Appellant

MISS K HOUGHTON (instructed by Piper Smith Watton) appeared on behalf of the Respondent

Tuesday, 7th December 2004




This is an appeal from an order dated 22nd April 2004 as varied by an order dated 16th June 2004 in which His Honour Judge Knight QC stayed the appellant's claim under section 9(4) of the Arbitration Act 1996 ("the Arbitration Act") and ordered the appellant to pay the respondent's costs. The appeal is brought with the permission of the judge.

The claim


By an agreement in writing, dated 10th September 2002, on the JCT Agreement for Minor Works Form, as amended to include some amendments at least up to MW 1998, the appellant, which is a builder, and which I will call the contractor, agreed to carry out repairs and other works to premises at Baltic Quay, Sweden Gate, in London SE16. The respondent is the employer under the contract.


The contract price was £139,045. The contractual commencement and termination dates were 9th September 2002 and 27th January 2003 respectively. Clause 4 of the contract makes detailed provisions for payment. Clause 4.2 provides for the contract administrator, which was Sturges Associates (SMS), at intervals of not less than 4 weeks to certify progress payments as due to the contractor in respect of "the value of the Works properly executed" less a retention of 5 per cent, and further provides that the employers shall pay the amount so certified within 14 days of the date of the issue of the certificate.


SMS issued a number of certificates on the following dates for the following amounts, net of retention, and exclusive of VAT: No 1, 14th October 2002, £14,673.70; No 2, 25th November 2002, £15,273.15; No 3, 29th January 2003, £40,760.70; No 4, 28th February 2003, £64,040.45; and No 5, 25th June 2003, £28,331.34.


The employer paid the sums certified in the first four certificates, which amounted to £134.748, but they have not paid the amount certified in Certificate No 5. In fact by the time Certificate No 5 was issued SMS had issued a certificate of practical completion dated 31st March 2003. The date certified as the date of practical completion was 28th March 2003, and the expiry date of defects liability period was stated as 27th September 2003. That period of 6 months was the period specified in clause 2.5 of the contract.


Clause 4.3 of the agreement provides so far as relevant:

"The Contract Administrator shall within 14 days after the date of practical completion certified under clause 2.4 hereof certify payment as an amount due to the Contractor of 97 1/2%… of the total amount to be paid to the Contractor under this Contract so far as that amount is ascertainable at the date of practical completion including any amounts either ascertained or agreed under clauses 3.6 and 3.7 hereof less the total amounts due to the Contractor in certificates of progress payments previously issued. The penultimate certificate shall state to what the progress payment relates and the basis on which the amount of the certificate was calculated. The final date for payment by the Employer of the amount so certified shall be 14 days from the date of issue of that certificate. If the Employer fails properly to pay the amount, or any part thereof, due to the Contractor by the final date for its payment the provisions of clause 4.2.2 shall apply. The provisions of clause 4.4 shall apply to the certificate issued pursuant to this clause 4.3."


SMS did not issue a document entitled "Penultimate Certificate" within 14 days but did issue Certificate No 5 on 25th June 2003. It may be that, even though it does not say so, that was intended to be a penultimate certificate under clause 4.3, because the retention was expressed to be 2.5 per cent as contemplated by that clause. Indeed, the contractor's case is now that Certificate No 5 is indeed the penultimate certificate contemplated by clause 4.3.


I should note clauses 4.4.1 and 4.4.2, which provide for the employer to give certain notices. Neither notice was given in this case, with the result that clause 4.4.3 applies. It provides:

"Where the Employer does not give a written notice pursuant to 4.4.1 and/or to clause 4.4.2 the Employer shall pay the amount stated as due in the certificate."


I should also note clause 4.5 which is headed "Final Certificate" and provides:

"The Contractor shall supply within three months… from the date of practical completion all documentation reasonably required for the computation of the amount to be finally certified by… the Contract Administrator and… the Contract Administrator shall within 28 days of receipt of such documentation, provided that… the Contract Administrator has issued the certificate under clause 2.5 hereof, issue a final certificate certifying the amount remaining due to the Contractor or due to the Employer as the case may be and such sum shall, as from the fourteenth day after the date of issue of the final certificate be a debt payable as the case may be by the Employer to the Contractor or by the Contractor to the Employer."


On 10th July 2003 the contractor wrote to the employer in these terms:

"Our invoice SPA B897 was due to be paid by 9th July.

"We note you have failed to comply with the conditions of [contract] regarding payment and hereby put you on 7 day notice that we will determine the contract if you continue to default with payment."


On 18th July the contractor wrote as follows:

"Further to our letter of 10th July, putting you on notice of our intention to determine the contract, we note you have failed to respond or make the payment due under the contract. We therefore continued the default.

"We therefore have no option but to determine the Minor Works Contract between ourselves.

"We have determined the Contract under class 'does not pay by the final date for payment'.

"Thus the contract is at an end and all sums are due including any retention.

"We will therefore prepare our final account as required under clause 7.3.3 —Please note this will be due for settlement within 28 days of submission (clause 7.3.3).

"Please also be aware that the Contract Administrator now has no involvement in final account figures and it is the Contractor who prepares the final account."


The contractor thus purported to determine the contract under clause 7.3.1, which provides, under the heading "Determination by Contractor":

"If the Employer makes default in any one or more of the following respects:

'1 he does not pay by the final date for payment the amount properly due to the Contractor in respect of any certificate or pay any VAT due on that amount pursuant to clause 5.2 and the Supplementary Memorandum Part B…

"the Contractor may give notice to the Employer which specifies the default and requires it to be ended. If the default is not ended within 7 days of receipt of the notice the Contractor may by further notice to the Employer determine the employment of the Contractor under this Contract. Such determination shall take effect on the date of receipt of the further notice. A notice of determination under clause 7.3.1 shall not be given unreasonably or vexatiously."

The contractor thus gave a notice under clause and then purported to determine the contract under the last part of clause 7.3.


In the letter just quoted the contractor said that it would prepare its final account as required by clause 7.3.3 which would be due for settlement within 28 days. Clause 7.3.3 provides:

"Upon determination of the employment of the Contractor under clause 7.3.1 or clause 7.3.2 the Contractor shall prepare an account setting out

—the total value of work properly executed and of materials and goods properly brought on the site for the purpose of the Works, such value to be ascertained in accordance with this Contract as if the employment of the Contractor had not been determined together with any amounts due to the Contractor under the Conditions not included in such total value; and

—the cost to the Contractor of removing or having removed from the site all temporary buildings, plant, tools and equipment; and

—any direct loss and/or damage caused to the Contractor by the determination.

After taking into account amounts previously paid or otherwise discharged to the Contractor under this Contract, the Employer shall pay to the Contractor the full amount properly due in respect of this account within 28 days of its submission by the Contractor."

As can be seen, the amount which the employer is bound to pay under clause 7.3.3. is "the full amount properly due in respect of this account within 28 days."


On the same day that the determination letter was sent, 18th July 2003, the contractor wrote a further letter enclosing a final account. The letter drew attention to the fact that the contract had now been determined and added that as required under the contract the contractor had prepared the final account and that the employer was duly bound to pay it within 28 days. The last paragraph asserted that legal action would be commenced immediately after 28 days and without...

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