| Date | 31 October 2001 |
|
|
| Judgment | Maxi Construction Management Limited -v- Morton Rolls Limited, Outer House Court of Session 7 August 2001 |
|
|
| The Issue | Discussion of the requirements for the making of an application for payment in accordance with the Construction Act. |
|
|
| Implication |
The making of a claim for payment in accordance with paragraph 12 of the Scheme may require a fully detailed breakdown of the basis upon which each item is calculated. |
printPerhaps the most important parts of the Housing Grants, Construction and Regeneration Act 1996 are those parts that deal with payment. Section 110 of the Act requires that every construction contract shall provide an adequate mechanism for determining what payment becomes due under the contract. Construction contracts must also provide the means of determining a final date for payment in relation to any sum which becomes due. Section 110(2) and Section 111(1) further require that the paying party should give notices of payment and withholding. Where the parties to a relevant construction contract fail to agree terms which reflect these requirement, then the relevant provisions of the Scheme for Construction Contracts Regulations 1998 will apply. The Scheme sets out how the contractor will become entitled to be paid the value of any work performed in accordance with the construction contract. It also sets down in paragraph 4 that payment shall become due on the later of, either, 7 days following the relevant period, or the making of a "claim by the payee". In paragraph 12, the expression "claim by the payee" is defined as meaning, "a written notice given by the party carrying out work under a construction contract to the other party specifying the amount of any payment or payments which he considers to be due, specifying to what the payment relates (or payments relate) and the basis on which it is, or they are, calculated". In the recent case of Maxi Construction Management -v- Morton Rolls, the Judge had to closely examine these provisions. Maxi had carried out certain construction works for Morton at Great Western Retail Park in Glasgow, under the Scottish version of a JCT With Design form of contract. Maxi argued that it was entitled to an interim payment corresponding to its interim valuation no 10. It argued that Morton had no relevant defence to that claim, since Morton had neither given a payment notice nor a withholding notice. Maxi referred to clause 30.3.5 of the JCT Form, which provides that in the absence of payment or withholding notices corresponding with Sections 110(2) or 111(1), the contractor is entitled to be paid the amount stated in the application for interim payment. This is an important clause which only appears in the With Contractor's Design version of the JCT form. In all other forms, the absence of a payment or withholding notice would not have this effect. The paying party would still be entitled to argue that the amount due was less than the sum claimed. Interestingly, this particular clause has already been examined by the courts. In C & B Scene Concept Design -v- Isobars the Judge held that where the parties had failed to settle the method by which the amount of interim payments should be calculated, the entirety of the contract provisions for payment fell away, including clause 30.3.5. This was a surprising conclusion, since the Act and the Scheme only require that the relevant provisions of the Scheme shall operate in such circumstances. In Maxi Construction, it was not argued that clause 30.3.5 should fall away in the event that parts of the contract payment terms were substituted by the Scheme. On the contrary, whilst Morton argued that the amended payment terms did not comply with the requirements of the Act and that those terms required to be replaced by the relevant provisions of the Scheme, Morton accepted that clause 30.3.5 would survive this process. Instead Morton argued that interim valuation no 10 which had been submitted by Maxi did not constitute either a "claim by the payee" within the meaning of paragraph 12 of the Scheme, or an application for interim payment within the meaning of the contract conditions. Counsel for Morton argued that interim valuation no 10, with its covering letter, could not be regarded as specifying the amount which Maxi considered was due, because the covering letter made it plain that what was sought was not yet payment, but rather valuation and certification. The Employer's Requirements imposed the requirement that the contractor should seek agreement of the amount of each valuation before submission of his application for payment. These provisions reinforced the view that interim valuation no 10 was concerned with the pre-application stage of seeking agreement on the valuation, and did not constitute a claim for payment. Moreover, Morton argued that interim valuation no 10 did not specify the basis on which it was calculated. Morton drew attention to a number of components of the valuation where lump sum figures (of the order of £35,000 in respect of one item for example), were claimed without explanation or further breakdown. Again, it was argued that these were of sufficient importance that interim valuation 10 could not be regarded as a claim for payment complying with paragraph 12 of the Scheme. Lord MacFadyen carefully considered these submissions. He came to the conclusion that the employer's representatives were entitled to take interim valuation no 10 and its covering letter as constituting no more than a request for agreement of the valuation, and as such preliminary to the subsequent making of a claim for payment. More significantly, Lord MacFadyen held that the interim valuation did not specify for each item claimed the basis on which the payment was calculated and accordingly it failed to satisfy the requirements of paragraph 12 of the Scheme. In consequence, despite the operation of clause 30.3.5 of the contract, the application put forward by Maxi could not form a basis for establishing the amount due. Judgment for the full amount claimed was refused.
CJ-0143
|
|||
|
© Brewer Consulting |
|||
 |
|||