Windglass Windows Ltd v Capital Skyline Construction Ltd and Another
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE COULSON |
| Judgment Date | 14 July 2009 |
| Neutral Citation | [2009] EWHC 2022 (TCC) |
| Docket Number | Case No: HT-09251 |
| Date | 14 July 2009 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2009] EWHC 2022 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
St. Dunstan's House
133137 Fetter Lane
London EC4A 1HD
Before: MR. JUSTICE COULSON
Case No: HT-09251
MR. JAMES BOWLING (instructed by Messrs Gullands) for the Claimant
MR. PETER BROGDEN (instructed by Goldkorn Mathias Gentle Page LLP) for the Defendants
By a contract evidenced in writing and made on about 10th November 2008, the first defendant (“Capital”) engaged the claimant (“Windglass”) to supply and install glazed windows, doors and screens at a site known as City Link Court, Long Gate, London SE1 4PU. The second defendant (“LCGH”) is Capital's parent company.
The contract did not contain an adequate mechanism for determining either what interim payments became due under the contract or when they became due for payment. Accordingly, pursuant to Part II of The Scheme for Construction Contracts ( SI 1998/649) the following terms were implied into the contract between the parties:
2 (1) The amount of any payment by way of instalments or stage or periodic payments in respect of a relevant period shall be the difference between the amount determined in accordance with sub-paragraph (2) and the amount determined in accordance with sub-paragraph (3).
(2) The aggregate of the following amounts –
(a) an amount equal to the value of any work performed in accordance with the relevant construction contract during the period from the commencement of the contract to the end of the relevant period (excluding any amount calculated in accordance with sub-paragraph (b)),
(b) where the contract provides for payment for materials, an amount equal to the value of any materials manufactured on site or brought onto site for the purposes of the works during the period from the commencement of the contract to the end of the relevant period, and
(c) Any other amount or sum which the contract specifies shall be payable during or in respect of the period from the commencement of the contract to the end of the relevant period.
(3) The aggregate of any sums which have been paid or are due for payment by way of instalments, stage or period payments during the period from the commencement of the contract to the end of the relevant period …
4. Any payment of a kind mentioned in paragraph 2 above shall become due on whichever of the following dates occurs later –
(a) the expiry of 7 days following the relevant period mentioned in paragraph 2(1) above, or
(b) the making of a claim by the payee.
5. The final payment payable under a relevant construction contract, namely the payment of an amount equal to the difference (if any) between –
(a) the contract price, and
(b) the aggregate of any instalment or stage or period payments which have become due under the contract,
shall become due on the expiry of –
(a) 30 days days following completion of the work, or
(b) the making of a claim by the payee,
whichever is the later …
8(2) The final date for the making of any payment of a kind mentioned in paragraphs 2, 5, 6 or 7, shall be 17days from the date that payment becomes due.
9. A party to a construction contract shall, not later than 5 days after the date on which any payment –
(a) becomes due from him, or
(b) would have become due, if –
(i) the other party had carried out his obligations under the contract, and
(ii) no set-off or abatement was permitted by reference to any sumclaimed to be due under one or more other contracts,
give notice to the other party to the contract specifying the amount (if any) of the payment he has made or proposes to make, specifying to what the payment relates and the basis on which that amount is calculated.
10. Any notice of intention to withhold payment mentioned in section 111 of the Act shall be given not later than the prescribed period, which is to say not later than 7 days before the final date for payment determined either in accordance with the construction contract, or where no such provision is made in the contract, in accordance with paragraph 8 above.
Windglass' first application for an interim payment was in the sum of £45,000 plus VAT and dated 28 th February 2009. In accordance with the implied terms set out above, the due date was 7 th Marc 2009 and the final date for payment was 24 th March 2009. Windglass' second application was in the sum of £121,000 plus VAT. That was dated 31 st March 2009. In accordance with the terms of the contract, the due date was 7 th April 2009 and the final date for payment was 24 th April 2009.
There was a dispute between the parties as to whether or not Windglass had agreed to make their applications for interim payment in a particular form. Capital said that they had agreed to make those applications in their standard format. Windglass said that there was no such agreement. That was a matter that was part of the dispute referred to the adjudicator. He concluded that there was no agreed format for the interim applications. That decision, of course, is binding on the parties and, indeed, on me.
However, it appears that, because the applications were not made in accordance with their preferred template, Capital declined to make any payments at all to Windglass, notwithstanding the delivery of the doors, windows and screens to site and their installation on site. Windglass therefore referred their unpaid claims to adjudication. By a decision dated 2 nd June 2009, the adjudicator found that Capital owed to Windglass the sum of £149,400 plus VAT, together with interest at £2,129.27. He also found that Capital were liable for the RICS adjudication appointment fee of £289.56 and the adjudicator's fees of £5,382.00.
The basis of the adjudicator's decision was as follows:
(a) The due dates for payment and the final dates for payment were those set out in paragraph 3 above.
(b) Capital had failed to issue any effective notices of payment and/or withholding notices under the scheme, so they were not entitled to raise any set-off or cross-claim either for defects or delay.
(c) Windglass were entitled to the sums sought, less a 10% reduction to reflect “final snagging and review”.
No part of the sums awarded by the adjudicator was paid by Capital. Accordingly, on 19th June 2009, Windglass commenced these proceedings. They now seek summary judgment against Capital in the total sum of £185,033.83 including interest up to today's date. Further, or in the alternative, Windglass had originally sought summary judgment in the same sum against LCGH on the basis of an alleged guarantee provided by LCGH in a letter of 5 th November 2008. However, for reasons which are dealt with in greater detail in section 3 below, Windglass now merely seek directions for the future conduct of their claim against LCGH.
Windglass' application for summary judgment under CPR Part 24 against Capital is resisted on the basis that the adjudicator exceeded his jurisdiction when he concluded that the withholding notices were invalid because they did not set out any valid grounds for withholding. The argument is that the Housing Grants Construction and Regeneration Act 1996 does not require that the ground for withholding payment set out in the notice be valid for that notice to be an effective withholding notice. If that was wrong, Capital had originally sought a stay of execution on the grounds of Windglass' financial position, but the application for a stay is no longer maintained. On the basis of the evidence before me, I consider that that concession is rightly made.
As for the application against LCGH, that is resisted on the basis that, even if the adjudicator's decision was valid and should be enforced as against Capital, LCGH say that they were never a party to a signed guarantee; that the guarantee was sent without authority; and that, in any event, a decision of an adjudicator cannot bind a surety.
I deal in Section 2 below with the application against Capital before moving on to Section 3 to deal with the claim against LCGH and the parties' competing positions. I set out a short summary of my conclusions in Section 4 below. I am grateful to both counsel for their assistance in dealing with these issues.
The Claim against Capital
The Starting Point
The proper starting point for any application to enforce the decision of an adjudicator can most conveniently be found in the words of Chadwick LJ in Carillion Construction Limited v Devonport Royal Dockyard Limited, where he said:
85. The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the adjudicator's decision unless it is plain that the question which he has decided was not the question referred to or the manner in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the court will interfere with the decision of an adjudicator …
86. … Parliament may be taken to have recognised that in the absence of an interim solution, the contractor or a sub-contractor or his sub-contractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting the legitimate cash flow requirements of contractors and their subcontractors. The need to have the right answer has been subordinated to the need to have an answer quickly. The scheme was not enacted in order to provide definitive answers to complex questions …”
The Law relating to Withholding Notices
Sections 110 and 111 of the 1996 Act provide as follows:
110. Dates for payment
(1) Every construction contract shall
(a) Provide an adequate mechanism for determining what payments become due under the contract and when.
(b) Provide or a final date...
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