| Date | 30 October 2002 |
|
|
| Judgment | Levolux AT Limited -v- Ferson Contractors Limited, TCC 26 June 2002 |
|
|
| The Issue | Enforcement of an adjudicator's decision in favour of a sub-contractor, when employment of that sub-contractor has been determined under the terms of the sub-contract. |
|
|
| Implication |
The statutory right to suspend works, whether exercised or not, may be implied from an adjudicator's decision to the effect that a sum due has not been paid in full. |
printIt is a common provision of many standard forms of sub-contract that when the sub-contractor's employment is brought to an end, or as it is often called, 'determined' by the main contractor, for example for failure to proceed regularly and diligently with the works, there will be no obligation to pay the sub-contractor further monies until completion of the works by other parties, when an account of debits and credits can be made. Difficulties may then arise where the sub-contractor commences an adjudication and obtains an award for payment of monies which is expected to be binding on both parties. The contradiction between those two provisions was examined in the recent case of Levolux AT Ltd -v- Ferson Contractors Ltd. Levolux were sub-contractors to Ferson for the installation of curtain wall and louvre systems. The sub-contract was in the form of the GC/Works sub-contract, with certain amendments. A dispute arose concerning the amount due to Levolux upon its interim payment, and in consequence Levolux suspended its operations on site. Ferson, in response, wrote to Levolux giving notice that it required Levolux to recommence works. Since this had not occurred, one week later Ferson confirmed that, in accordance of clause 29 of the sub-contract, it had determined the sub-contract between the parties. The effect of this determination, according to Ferson, was that by Clause 29.8.1 "all sums of money that may be due or accruing due from the contractor to the sub-contractor shall cease to be due or accrue due". Accordingly, Ferson believed that it did not have to make any further payment to Levolux until after the completion of the works and the making good of defects. Meanwhile, Levolux had commenced adjudication to recover the monies it claimed was due on interim payment. Levolux confirmed that the dispute was Ferson's failure to pay its interim application for which a payment notice in the amount of approximately £56,000 had been given. Despite having received the corresponding payment notice, Levolux confirmed that only £4,000 had been paid. Ferson had relied upon a notice of withholding of payment. Levolux argued that this notice of withholding was invalid because, whilst it specified the amount which Ferson intended to withhold, it did not adequately specify the grounds for such a withholding. The matter proceeded to adjudication and the adjudicator agreed with Levolux. He confirmed that whilst the notice of withholding had clearly particularised the amount to be held, it did not specify the grounds. Accordingly, the adjudicator ordered that Levolux be paid the entire amount of its claim, together with interest. Ferson refused to pay, and the matter then moved on to enforcement proceedings. At this point, unsurprisingly, Ferson put forward its primary case that, prior to the adjudication, it had determined the sub-contract between the parties in accordance with Clause 29. This being the case, argued Ferson, it was not bound to make any further payment to Levolux until after the works had been completed. Ferson argued that the provisions of Clause 29 of the GC/Works sub-contract provided a complete code for the rights and liabilities of the parties upon determination of the sub-contract. Ferson further noted that the dispute that had been referred to adjudication had not expressly included issues concerning the determination of the sub-contract. Levolux argued that whilst the adjudicator had not expressly dealt with the matter of determination, it was clear that the adjudicator had nevertheless dealt with this issue. The adjudicator had agreed that Ferson's withholding was invalid. It followed, therefore, that Levolux was entitled to suspend performance of its works in accordance with the HGCRA. Paragraph 112(1) states "where a sum due under a construction contract is not paid in full by the final date for payment, and no effective notice to withhold payment has been given, the person to whom the sum is due has the right to suspend performance of his obligations under the contract". His Honour Judge David Wilcox was satisfied that this was a forceful argument. He agreed that a necessary implication of the adjudicator's award, which he held to be a competent award within the jurisdiction of the adjudicator, was that Levolux had been entitled to suspend the works. In consequence, Ferson's attempted determination of the sub-contract had no contractual effect. To reinforce this view, Judge Wilcox held that in any event, the references in Clause 29 to monies "that may be due or accruing due from the contractor" did not include monies due under an adjudicator's award. This meant that the contractual scheme which assumed that no monies would be paid until completion of the works, did not apply to an adjudicator's award. In conclusion, Levolux were entitled to enforcement of the adjudicator's decision for immediate payment.
CJ-0242
|
|||
|
© Brewer Consulting |
|||
 |
|||