Rupert Morgan Building Services (LLC) Ltd v Jervis and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jacob,Lord Justice Sedley,Lord Justice Schiemann |
| Judgment Date | 12 November 2003 |
| Neutral Citation | [2003] EWCA Civ 1563 |
| Docket Number | Case No: B2/2003/0200 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 November 2003 |
[2003] EWCA Civ 1563
Lord Justice Schiemann
Lord Justice Sedley and
Lord Justice Jacob
Case No: B2/2003/0200
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WINCHESTER COUNTY COURT
(His Honour Judge Thompson QC)
Mr Julian Horne (instructed by Messrs Dunton Gregory for the Respondent
Mr Simon Hughes (instructed by Messrs Stitt & Co) for the Appellants
This appeal involves a point of some importance in the world of building contracts. Mr Iain Wallace QC correctly forecast (in an article entitled The HGCRA: A Critical Lacuna? (2002) 18 Const. LJ 117) that a Scottish case dealing with it, SL Timber Systems v Carillion Construction [2001] BLR 516, "seems certain to be reviewed at some future date by an appellate court in England." And here it is. The point concerns the meaning of 111(1) of the Housing, Grants (Construction and Regeneration) Act 1996. It arrives via permission to appeal (given by Clarke LJ) from the decision of HHJ Anthony Thompson QC. Judge Thompson had dismissed an appeal from District Judge Murphy at Winchester County Court.
I go to the provision first:
"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."
The appellant defendants ("the clients") were having building works done on their cottage. The claimants were the builders. There was a written contract in a standard form provided by the Architecture and Surveying Institute ("ASI"). The clients were using the services of an architect. The builders were being paid on an interim basis pursuant to the scheme of the contract. (Section 109 of the Act required stage payments for works estimated at over 45 days, as these were.) Under the contract the architect is to issue an interim certificate, in practice based on his scrutiny of a bill presented by the builder. In this case there was a 7 th interim certificate in the sum of £44,000 odd plus VAT. The clients accept that part of that is payable but dispute the balance amounting to some £27,000. The builders seek summary judgment for the balance.
The clients did not give "a notice of intention to withhold payment" before "the prescribed period before the final date for payment." The builders contend that it follows, by virtue of s.111(1) that the clients "may not withhold payment". So they seek summary judgment. The clients say they can withhold payment, that it is open to them by way of defence to prove that the items of work which go to make up the unpaid balance were not done at all, or were duplications of items already paid or were charged as extras when they were within the original contract, or represent "snagging" for works already done and paid for.
The rival arguments as presented in the courts below were for what can be termed "wide" and "narrow" constructions. The wide construction espoused by the builders is that once it shown that there is a certificate and no withholding notice, the certified sum must be paid – it cannot be withheld. The narrow construction is roughly to the effect that if work has not been done there can be no "sum due under contract" and that accordingly s.111(1) simply does not apply. As HHJ Humphrey Lloyd put it in ( KNS Industrial Services v Sindall 17th July 2000) "one cannot withhold what is not due."
Each construction has some basis in authority and learned writings. For the wide construction there is HHJ Bowsher QC in Whiteways Contractors v Impresa Castelli (2000) 16 Const. LJ 453, HHJ Humphrey Lloyd QC in KNS, HHJ Gilliland QC in ( Millers Specialist Joinery v Nobles 3rd August 2000) and Keating on Building Contracts (7 th Edn. 2001, para15–15H). For (or apparently for) the narrow construction there is HHJ Thornton QC in Woods v Hardwicke [2001] BLR 23, (arguably) HHJ Hicks QC in VHE Construction v RBSTB Trust [2000] BLR 187 and Lord Macfadyen in SL Timber Systems v Carillion Construction [2001] BLR 516 and Mr Wallace's article The views expressed in most of these cases are more or less oblique to the point directly in issue here. Moreover there were variants of the narrow construction, that is why I said "roughly to the effect". The variants were around the theme of whether the section merely prevented the raising of counterclaims or did it also cover matters of abatement and set off? And what about a counterclaim based on work allegedly done badly?
I do not think these questions arise at all. This is because some of the debate seems to have been based upon an unspoken but mistaken assumption, namely that the provision is dealing with the ultimate position between the parties. That is not so as is pointed out by Sheriff J.A. Taylor in Clark Contracts v The Burrell Co. [2002] SLT 103. He casts a flood of light on the problem.
Before going to what he said, it helps to go back to the contract in issue in this case. It identifies the parties, including the architect. It provides for interim certificates on a 14 day basis and a 14 day period for honouring certificates. It provides for the issue by the architect of interim certificates and a final certificate. The interim certificates, as is conventional, are on a "global" basis. By this I mean that each interim certificate takes account of the total work done to date and the total payments to date. It follows that if there is an error (e.g. a double charging) in an interim certificate, it can and should be corrected in the next. That is not so for the final certificate. This naturally raises the question; "what if that is wrong?" Notably the contract provides that "no certificate shall be taken as conclusive evidence that the work, materials or goods to which it relates are in accordance with this contract."
The time period during which matters can be checked before the final certificate is to be issued is much longer than that for interim certificates. That is as one would expect. In this case it is essentially three months. In practice therefore a final certificate is more likely to be accurate than an interim certificate. But nothing actually turns on this for it is common ground that s.111(1) applies to both interim and final certificates.
It was the debate about a final certificate which brought out the true nature of the provision. Suppose a final certificate included items not done or charged for twice and the time for...
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