Wilson and Sharp Investments Ltd v Harbour View Developments Ltd

JurisdictionEngland & Wales
JudgeLady Justice Gloster,Sir Colin Rimer,Lord Justice McCombe
Judgment Date13 October 2015
Neutral Citation[2015] EWCA Civ 1030
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A2/2014/2542
Date13 October 2015

[2015] EWCA Civ 1030

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE,

CHANCERY DIVISION

HIS HONOUR JUDGE HODGE QC

3113 of 2014

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice McCombe

Lady Justice Gloster

and

Sir Colin Rimer

Case No: A2/2014/2542

Between:
Wilson and Sharp Investments Ltd
Appellant
and
Harbour View Developments Ltd
Respondent

Ms Krista Lee (instructed by BPL Solicitors Ltd) for the Appellant

Mr Clifford Darton (instructed by Watkins Ryder Solicitors Ltd) for the Respondent

Hearing dates: Thursday 16 July 2015.

Lady Justice Gloster

Introduction

1

This is an appeal against the dismissal by His Honour Judge Hodge QC ("the judge") of an application by Wilson and Sharp Investments Ltd ("the appellant") for an injunction to restrain Harbour view Developments Ltd ("the respondent") from presenting a winding up petition against the appellant based on an alleged debt of £902,506. The debt is the balance alleged to be due under four interim certificates issued on 1 August and 5 September 2013 under two building contracts by which the respondent carried out building works at the appellant's sites in Bournemouth. The appellant also appeals against the judge's order that it pays the respondent's costs of the application summarily assessed at £28,196.98.

2

Miss Krista Lee appeared as counsel on behalf of the appellant; Mr Clifford Darton appeared as counsel on behalf of the respondent.

Issues arising on the appeal

3

In summary the issues on the appeal are:

i) Issue 1: whether the proposed petition debt is disputed on substantial grounds.

The appellant contends that the sums set out in the interim payment certificates were no longer payable after the respondent entered Creditor's Voluntary Liquidation ("CVL") on 25 July 2014; this argument is based upon clauses in the contracts that state:

"As from the date the Contractor becomes insolvent … the Employer need not pay any sum that has already become due."

The appellant contends that the judge wrongly rejected its construction of the contract and failed to apply the correct test of whether the debt was disputed in good faith and on substantial grounds.

ii) Issue 2: whether, in accordance with what is said to be the established practice of the Technology and Construction Court ("TCC") not to enforce interim payment obligations in favour of insolvent contractors, the respondent should not be permitted to enforce an interim payment obligation by way of a winding up petition, given that it is insolvent and in CVL.

The appellant contends that the judge, in permitting the respondent to present a petition, acted inconsistently with the established practice of the TCC which, it is said, recognises the provisional nature of interim payment obligations and that enforcement should not be ordered where there is no prospect of recovering payment if those payment obligations are subsequently varied.

iii) Issue 3: whether the appellant has serious and genuine cross claims which exceed the sums alleged to be outstanding under the interim payment certificates.

The appellant contends that the respondent's works were overvalued in the interim payment certificates and further that it has substantial claims for damages based upon the respondent's repudiatory breach of contract and defective and late works. It contends that the judge was wrong to reject such arguments and to refuse to exercise his discretion in favour of the appellant.

Factual background

4

The appellant is a property developer, whose directors are Mr Sam Wilson and Mr Craig Sharp. The respondent was at the material time a building contractor, whose main director was Mr Paul Clapcott. The appellant and the respondent entered into two contracts ("the contracts") for the development of student accommodation on Christchurch Road, Bournemouth. The first contract was in respect of 4 Christchurch Road ("Union House") and is dated 15 August 2012. The second contract was in respect of 6 Christchurch Road ("Hurn House") and was entered into in the first half of 2013. Both contracts were subject to the JCT 1 ICD 2 Conditions ("the Conditions").

5

Mr Tom Green of Greenward Associates Ltd ("GA") was the architect/contract administrator and quantity surveyor (as defined) appointed in respect of the contracts. By clause 3.4.1 of the contracts the appellant was given the power to replace Mr Green, but by clause 3.4.2 it was provided that any such replacement could not:

"…disregard or overrule any certificate, opinion, decision or instruction given by any predecessor in that post, save to the extent that the predecessor if still in post would then have had the power under this Contract to do so."

6

Pursuant to sections 110 to 111 of the Housing Grants Construction Grants and Regeneration Act 1996 ("the HGCRA"), the Conditions included provisions for the making of monthly interim payments. These provisions allowed for:

i) the contractor (i.e. the respondent) to make an application for payment not less than 7 days before the due date (clause 4.10.1);

ii) the architect/contract administrator to issue an interim certificate stating the sum due not later than 5 days after the due date (clause 4.7.2);

iii) a final date for payment of an interim payment 14 days after the due date (clause 4.11.1);

iv) the sum to be paid to be as stated in the interim certificate, save and to the extent that the employer (i.e. the appellant) issued a Pay Less Notice (as defined) not later than 5 days before the final date for payment (clause 4.11.5).

7

The amount due in respect of each interim certificate was the total value of the work properly executed by the contractor, site materials provided and any listed items (clause 4.8.1). Clause 4.14 provided for a final assessment of the Contract Sum in the

Final Certificate (both as defined), which could result in adjustment of any of the valuations in the earlier interim certificates.
8

Clause 8.5 of the Conditions dealt with the insolvency of the contractor. The relevant provisions will be set out in full below. It is the appellant's contention that the effect of clauses 8.1.3, 8.5.3, 8.5.3.1 and 8.7.3 was that, as from the date that the contractor passed a resolution for voluntary winding-up without a declaration of solvency, the employer was no longer under any obligation to pay any sum that had already become due and payable under any interim payment certificate.

9

The contract dated 15 August 2012 in respect of Union House provided for the respondent to take possession of the site on 3 September 2012 and for a completion date of 31 August 2013. Under the contract the appellant was entitled to recover liquidated damages of £10,000 per week in the event of delay but only after the Contract Administrator had certified non-completion in accordance with clause 2.22.

10

The contracts provided for a rectification period of 6 months and by clause 2.30 obliged the respondent to return to site and remedy any defects of which it was given notice by the Contract Administrator.

11

By an undated deed ("the Guarantee") the appellant's directors, Mr Sharp and Mr Wilson, personally guaranteed payment of certain sums which had to be paid in accordance with the Works. There was subsequently a dispute as to the extent of the sums in respect of which Mr Sharp and Mr Wilson had given their guarantees.

12

The respondent obtained possession of the site at Union House in December 2012 and Hurn House in April of the following year, being sometime after the dates provided in the contracts. Following possession the respondent proceeded with the Works (as defined) and various variations to the Works under the supervision of the Contracts Administrator, Mr Green.

13

In August and September 2013 the following interim certificates were issued by GA:

i) Union House Contract:

Issue Date

Interim Certificate

Gross Valuation

Amount Due

01/08/2013

14

£1,878,622.22

£339,712.41

05/09/2013

15

£2,197,163.12

£318,540.90

ii) Hurn House Contract

Issue Date

Interim Certificate

Gross Valuation

Amount Due

01/08/2013

7

£2,819,324.56

£530,962.76

05/09/2013

8

£3,270,635.43

£451,310.87

It is the appellant's case that the above interim certificates substantially overvalued the respondent's works. This is disputed by the respondent.

14

The appellant did not issue any Pay Less Notices and accordingly the appellant did not dispute that, according to the terms of the Conditions, the sums certified became payable and that the final dates for payment were 14 August 2013 and 14 September 2013 respectively. In their witness statements sworn in support of the application for the injunction, the directors of the appellant gave two reasons for not issuing Pay Less Notices at the time: first, it is said that the directors were not aware of the need to issue Pay Less Notices and GA did not advise them to do so; secondly, it is said that both the respondent and GA were refusing to disclose project documentation to the appellant and accordingly the appellant was not in a position to check GA's/the respondent's valuation and/or quantify the suspected overvaluation for the purposes of providing an adequately detailed Pay Less Notice.

15

Interim Certificate 14 was paid in full. The appellant does not dispute that, as at 12 November 2013, the amount unpaid was £1,202,506.55 in respect of the three remaining certificates.

16

The history of the dispute between the parties was set out in the witness statements that were before the lower court and in relation to which there was no cross-examination. According to the appellant's...

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8 cases
  • Grove Developments Ltd v S&T(UK) Ltd
    • United Kingdom
    • Queen's Bench Division (Technology and Construction Court)
    • 27 Febrero 2018
    ...Brown would support the approach set out in Section 6.2. 100 A similar point arose in the insolvency case of Wilson & Sharp Investments Limited v Harbour View Developments Limited [2015] EWCA Civ. 1030, where in paragraph 66, Gloster LJ said that “the fact that an employer accepts that inte......
  • S&T(UK) Ltd v Grove Developments Ltd
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    • Court of Appeal (Civil Division)
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    ...valuations of Harding's final account under clause 8.12.” 77 In Wilson and Sharp Investments Ltd v Harbour View Developments Ltd [2015] EWCA Civ 1030; 162 Con LR 154 the court restrained a contractor from presenting a winding up petition based on unpaid interim certificates, despite the abs......
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    • Queen's Bench Division (Technology and Construction Court)
    • 24 Septiembre 2018
    ...(in receivership) v George Wimpey UK Ltd [2007] UKHL 18, at [11], and Wilson and Sharp Investments Ltd v Harbour View Developments Ltd [2015] EWCA Civ 1030, at [53], – concerned an insolvency situation and the second involved the insolvency of the employer. In summary, those authorities con......
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    ...the decisions in Rupert Morgan Building Services (LLC) Ltd v Jervis [2003] EWCA Civ 1563 per Jacob LJ at Para.14; Wilson & Sharpe Investments v Harbour View Developments Ltd [2015] EWCA Civ 1030 per Gloster LJ at Para.66; and Matthew Harding t/a MJ Harding Contractors v Paice [2015] EWCA Ci......
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3 firm's commentaries
  • Late payment issues: stick to payment procedures and don't forget your right to adjudicate
    • United Kingdom
    • JD Supra United Kingdom
    • 17 Febrero 2016
    ...construction contracts. In a recent High Court case, for example, (Wilson and Sharp Investments Ltd v. Harbour View Developments Ltd [2015] EWCA Civ 1030), an unpaid contractor tried to recover payment on unpaid invoices by attempting to wind up the employer's business. This attempt failed ......
  • Late Payment Issues: Stick To Payment Procedures And Don't Forget Your Right To Adjudicate
    • United Kingdom
    • Mondaq UK
    • 24 Febrero 2016
    ...construction contracts. In a recent High Court case, for example, (Wilson and Sharp Investments Ltd v. Harbour View Developments Ltd [2015] EWCA Civ 1030), an unpaid contractor tried to recover payment on unpaid invoices by attempting to wind up the employer's business. This attempt failed ......
  • Projects And Construction Law Update - November 16, 2015
    • United Kingdom
    • Mondaq UK
    • 24 Noviembre 2015
    ...the latter is supposed to provide. To read more, please click here. Wilson and Sharp Investments Ltd v Harbour View Developments Ltd [2015] EWCA Civ 1030 Here the Court of Appeal granted an injunction which restrained a building contractor (Harbour View) from presenting a winding-up petitio......
1 books & journal articles
  • Bankruptcy and insolvency
    • United Kingdom
    • Construction Law. Volume III - Third Edition
    • 13 Abril 2020
    ...R&S Fire and Security Services Ltd v Fire Defence plc [2013] BLR 500; Wilson and Sharp Investments Ltd v Harbour View Developments Ltd [2015] EWCA Civ 1030 at [66], per Gloster LJ; Cosmur Construction (London) Ltd v St Lewis Design Ltd [2016] EWHC 2678 (Ch) at [4]–[5], per Nugee J. he opera......

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