Leander Construction Ltd v Mulalley and Company Ltd
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Coulson |
| Judgment Date | 21 December 2011 |
| Neutral Citation | [2011] EWHC 3449 (TCC) |
| Docket Number | Case No: HT-11-411 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 21 December 2011 |
[2011] EWHC 3449 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Coulson
Case No: HT-11-411
Mr Richard Coplin (instructed by Pinsent Masons) for the Claimant
Mr Paul Stafford (instructed by Huggins & Lewis Foskett) for the Defendant
Hearing date: 14 th December 2011
INTRODUCTION
Pursuant to a sub-contract (which, for these purposes, is agreed to have been made in September 2010), the claimant ("Leander") was engaged to carry out groundworks, drainage, concrete framework and associated works for the defendant ("Mulalley") at a development site known as Tigers Head, Bromley Road, Lewisham. According to Mulalley's own valuations, the sum of £131,078.12 is otherwise due to Leander but has not been paid as a result of two withholding notices, respectively dated 29 June and 3 August 2011. By these CPR Part 8 proceedings, Leander challenges the validity of those withholding notices.
The withholding notices are predicated on the basis that Leander was obliged, but failed, to carry out the sub-contract works in accordance with the programme dates/periods set out in the Activity Schedule, which was one of the sub-contract documents. Leander denies that the dates set out in that Schedule had any contractual force or validity at all. In these proceedings, Mulalley now accepts that the Activity Schedule does not set out dates or periods which are contractually binding, but maintains that Leander had an implied obligation to proceed regularly and diligently with the works, and that the Activity Schedule represents the best way to measure whether or not Leander complied with that term.
In response to that undoubted refinement of Mulalley's case, Leander argue that there was no implied term of this sub-contract which required them to proceed regularly and diligently with the works. That is an issue on which there are a number of authorities, analysed below. The agreed position, therefore, is that if I concluded that there was no such term, then the withholding notices would be invalid and Mulalley would not have been entitled to withhold the sum of £131,078.12. If, on the other hand, I concluded that there was such a term, then (subject to one minor point as to the form of the notices) Mulalley would be able to withhold their arguable entitlement to the £131,078.12.
At Section 2 below, I set out the relevant terms of the contract. At Section 3 below, I briefly outline the relevant facts. Although there was a good deal of factual material before the court, the vast majority of it seemed to me to be wholly irrelevant to the dispute between the parties. At Section 4 below, I set out and analyse the authorities on the issue as to whether or not a subcontract of this kind contains an implied term that the sub-contractor will proceed regularly and diligently with the works. My answer to that issue is set out in Section 5 below. In Section 6 I deal with the issue about the form of the notices. There is a short summary of my conclusions at Section 7 below. I am grateful to both counsel for their clear and concise submissions.
THE SUB-CONTRACT
There is apparently a dispute as to the formation of the sub-contract. However, the effect of this difference remains obscure, because all the important matters, such as the extent of the sub-contract documents, are agreed. It was on that express basis that I agreed to hear this CPR Part 8 claim at all.
The sub-contract order identified a commencement date of 27 September 2010, a sub-contract period (called the "duration of work") of 46 weeks, and a completion date of 8 August 2011. There were no contractual terms as to interim performance, no milestone dates or sectional completion provisions.
The principal terms of the contract were in the form of Mulalley's standard terms and conditions. My attention was drawn to the following general obligations:
"GENERAL
The Sub-Contractor will execute and complete with the best workmanship and materials the Sub-Contractor works strictly in accordance with the listed documents and Conditions in the Order and instructions of the Main Contractor and to the full satisfaction of the Main Contractor, the Employer, or it's Architects/Contract Administrator and subject to and with the benefit of the General conditions set out below…
3.2 The terms of the Main Contract shall be deemed to be incorporated in the Order without any modification thereto insofar as they are not repugnant to or inconsistent with that from which is stated herein and the Sub-Contractor shall observe perform and comply with such of the provisions of the Main Contract as are applicable to the Sub-Contractor and/or shall observe/perform and comply with those additional provisions as the Main Contractor shall request at no additional cost.
3.3 The Sub-Contractor shall indemnify the Main Contractor from and against any breach, non-observance or non-performance by the Sub-Contractor or his servants of the provisions of the Main Contract…
THE WORKS
…
5.2 If not previously submitted, within 7 days from the date hereof the Sub-Contractor shall submit to the Main Contractor for approval a programme showing the Sub-Contractor's proposals for the sequence and timing of all activities within the scope of the Sub-Contract Works with full details of its proposals for the supervision and manning of the Sub-Contract Works. Such proposals may be incorporated within the Main Contractor's programme but the Main Contractor reserves the right at its absolute discretion to vary the same to meet the requirements of the Main Contract."
It is common ground that Mulalley did not require Leander to produce a programme in accordance with clause 5.2. Instead, the parties agreed to use the Activity Schedule, referred to in the later parts of clause 5. These terms included the following:
"5.4 The Sub-Contractor shall upon and subject to the provisions of the Order carry out and complete the Sub-Contract Works shown upon and described by or referred to in the Order by the time or times stated in therein or as varied from time to time by the Main Contractor (who expressly reserves the right to do so), or, if not so stated in such manner as the Main Contractor or its agent may direct in conjunction with other Sub-Trades to the satisfaction of the Architect/Contract Administrator (whichever applicable) and the Main Contractor or its agent in accordance with the conditions contained within the Order and any drawings, specifications and other conditions annexed and instructions which may be supplied to the Sub-Contractor from time to time.
5.5 The Sub-Contractor must apply to the main Contractor for all drawings, details or information necessary to enable him to perform the Sub-Contract Works in accordance with the subcontract Activity schedule/agreed programme and duties. Such application to be made to the Main Contractor within a reasonable time prior to the carrying out of the particular subcontract works in order that the progress of the main contract works is not delayed or disrupted in any way…
Clause 10 was concerned with Set Off. Amongst those provisions were the following:
"10.1 Should the Sub-Contractor fail to comply with the conditions of this Agreement or, by any act, omission or default, interfere with the regular progress of the Main Contract Works, or completion of the same the amount any loss or expense thereby suffered by the Main Contractor as bona fide assessed by the Main Contractor shall be regarded as a debt which the Main Contractor may set-off in accordance with the provisions herein contained.
10.2 If the Sub-Contractor shall cause the Main Contractor expense, damage, loss or other costs or liability whatsoever by reason of any breach of this or any other contract between the Parties or by any tortious act under this or any other contract between the Parties…then without prejudice to and pending the final determination or agreement between the Parties as to the amount of such expense, damage, loss or other liability, indemnity or contribution or payment the Main Contractor shall be entitled to deduct from any monies payable to the Sub-Contractor now or in the future under this or any other contract and/or the Sub-Contractor shall pay such sum as the Main Contractor shall bona fide estimate (if not already ascertained or agreed) to be the amount of such expense, damage, loss or liability such estimate to be binding and conclusive upon the Sub-Contractor until such final determination or agreement…"
The termination provisions are important because they are the foundation of the alleged implied term to carry out the works regularly and diligently. The relevant provisions were as follows:
12.1 If the Sub-Contractor shall make default in any of the following respects:
.1 Fails to provide the Main Contractor with a duly completed Insurance Details, Competency Assessment and Acknowledgment Slip acceptable to the Main Contractor in his sole absolute opinion in accordance with Clause 2.
.2 or without reasonable cause suspends the Sub-Contract works before completion;
.3 or fails to proceed with the Sub-Contract Works regularly and diligently,
.4 or refuses or neglects after notice in writing from the Main Contractor or his agents to remove defective work goods or improper materials,
.5 or becomes insolvent,
.6 or fails to comply with instructions properly given by the Main Contractor or fails to co-operate reasonably in the general progress or with the Main Contractor,
then the Main Contractor may issue a notice to the Sub-Contractor defining the defaults and giving it 48 hours to comply. If in the opinion of the Main Contractor the Sub-Contractor...
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