REDPATH DORMAN LONG Ltd v CUMMINS ENGINE Company Ltd
| Jurisdiction | Scotland |
| Judgment Date | 10 July 1981 |
| Docket Number | No. 40. |
| Date | 10 July 1981 |
| Court | Court of Session (Inner House - Second Division) |
SECOND DIVISION.
ContractBuilding contractBreach of contractRetentionClaim for right of retention both at common law and under contractWhether term of contract relating to setoff excluded common law right of retention.
CompensationSet-offDebts between which compensation pleadableMutuality of contractRight of retention or compensation of alleged claimWhether contract excluded rightWhether contract excluded common law rightWhether debts must be contemporaneousWhether contemporaneous meant in existence at time payment fell due or at time claim for payment made.
The pursuers brought an action for payment against the defenders in respect of five interim certificates that had been issued by the architects in respect of a building contract between the pursuers and defenders. In terms of that contract, the sums contained in the certificates were due and payable by the defenders within 21 days. The defenders failed to make payment claiming that the pursuers were, in certain respects, in breach of contract which had caused the defenders loss in excess of the amount of the certificates, and that accordingly the defenders were entitled to claim a right of retention at common law in respect of the sums stated in the certificates.
The pursuers claimed that the common law right was excluded by clause 43 of the contract which was exhaustive of the right of retention and which applied only to liquidated or ascertained sums and not to an alleged claim for damages. Clause 43 provided: "Whenever under the contract any sum of money shall be recoverable from or payable by the contractor, such sum may be deducted from or reduced by the amount of any sum or sums then due or which at any time thereafter may become due to the contractor under or in respect of the contract." The pursuers also contended that the defenders' right to retain any sum, if competent, had to be in respect of a breach of contract for which a claim was in existence at the date the sum under the particular certificate fell due; and that the averments were lacking in specification in that respect.
Held (1) that the common law right of retention was not excluded unless it was shown in clear and unequivocal words that the parties had agreed in the contract that such right would not be available in respect of breaches of that contract and that on looking at the contract one looked at the contract as a whole to see if there were provisions which either expressly or by necessary implication excluded the common law right.
Gilbert-Ash (Northern) Ltd. v. Modern Engineering (Bristol) Ltd.ELR [1974] A.C. 689 followed.
(2) That, looking at this particular contract as a whole, clause 43 was not exclusive or exhaustive of the rights of retention and the defenders were entitled to found their claim to retention at common law for an alleged claim arising out of a mutual contract in addition to any right created by clause 43.
(3) That any retention by the defenders could only be in respect of a claim for breach of contract which was in existence at the time when payment fell due under the certificate on which retention was made, which in this case was 21 days after the issue of the certificate.
Dictum of Lord Benholme in Johnston v. RobertsonUNK (1861) 23 D. 646, 652 followed.
(4) That on the pleadings there was sufficient to indicate that at least some of the alleged breaches of contract by the pursuers took place before the dates the certificates fell due; and appealallowed to the extent of allowing a proof before answer.
Redpath Dorman Long Ltd. raised an action of payment in the Sheriff Court at Hamilton against Cummins Engine Company Ltd. By a contract between them, Redpath Dorman Long Ltd. carried out works for Cummins Engine Company Ltd. at Shotts expansion project, contract No. 3. The provisions of the contract provided that Cummins Engine Company Ltd. would make interim payments from time to time to Redpath Dorman Long Ltd. on the basis of the interim certificates granted by the architects to the contract. Between 19th January 1979 and 1st September 1979 five such interim certificates were issued. The total sum due under the certificates was 509,600 and, that amount not having been paid by the defenders, the pursuers raised an action for payment against them. The defenders claimed that the pursuers were in breach of contract since from the commencement of the contract they had failed to perform the works properly and in accordance with the terms and conditions of the contract. In particular, they had failed to produce working drawings timeously and correctly, to form proper access roads for the extension of the works, and to fabricate steelwork themselves, sub-contracting it out instead, without the consent of the defenders. Apart from the damage caused by their faulty workmanship, damage had also been caused to the defenders, it was alleged, by reason of delay which was the fault of...
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