| Date | 29 February 2006 |
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| Judgment | Maidenhead Electrical Services Ltd -v- Johnson Control Systems Ltd (unreported), 9 January 1996 |
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| The Issue | Interpretation of subcontract commercial matters. |
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| Implication |
An interesting case which dealt with an array of issues, including pay when paid, loss of profit on omitted works, and contractual notice and time limits as condition precedent. |
printIt is not common for a 7-nil score line to occur in premiership football, and it is far less common for a sub-contractor to win 7-nil in the Official Referees Court. This makes the case of Maidenhead Electrical Services Limited -v- Johnson Control Systems Limited remarkable. Johnson were sub-contractors employed by LMK Joint Venture to install building management systems in the construction of the research campus buildings for the Glaxo Group at Stevenage. Johnson in turn entered into a sub-sub-contract with Maidenhead to carry out electrical installation works. In an attempt to shorten the process for the resolution of disputes which had arisen, the parties agreed that the Court should be asked to try seven preliminary issues dealing with the contractual arrangements between them. Johnson sought to dispose of the sub-contractor's claims by placing reliance upon a number of sub-contract provisions to the effect that variations or changes required written consent, claims for extension of time and payment were required to be in writing and to be made within specific time limits, and liability for payment was dependent upon Johnson receiving payment from the LMK Joint Venture. Preliminary Issue No. 1 questioned whether Maidenhead were entitled to be paid for any change in respect of which no change order had been issued. The Court held yes. Whilst the Court was ready to hold that a change order was a condition precedent to a sub-contractors recovery, this did not alter the fact, however, that the real "issue" was whether or not Maidenhead were entitled to a change order in all the circumstances, and this was a matter for the full trial. Having dealt with one of the primary points in favour of the sub-contractor, the Court moved on to Preliminary Issue No. 2. This concerned the omission of work from the sub-contract. It was generally accepted that A cannot omit the work from his contract with B and engage C to carry out this work merely because it is financially advantageous to B. Without any basis to assess the reasonableness of the omissions, the Court held that the Defendant was in breach of contract. This would not apply, however, where proper notice of default had been served in respect of the sub-contractor's performance in accordance with the sub-contract conditions. Issue No. 3 dealt with whether the contract should contain implied terms as follows: 1. The Contractor would co-operate with the Sub-Contractor in the discharge of their sub-contract obligations. 2. The Contractor would not hinder or prevent the Sub-Contractor from carrying out and completing their sub-contract work. The Court held that both terms were indeed to be implied. Issue No. 4 dealt with the Contractor's contention that a sub-contractor was under a pay when paid provision. The relevant clause stated "within 14 days of the receipt by the company of any payment pursuant to such applications, the company shall account to the Contractor for all monies properly due hereunder to the Contractor in respect of the Works." The Court held that such wording did not amount to a pay when paid provision. Issue No. 5 asked whether the Plaintiff was entitled to make any claim for loss and/or expense caused by changes to the sequencing of Works or as a result of directions given by LMK. The contract provided that the sub-contract works were to be carried out diligently and in such order, manner and time as the Contractor may reasonably direct, so as to ensure completion in accordance with the sub-contract schedule. None of this prevented that directions given by LMK might constitute variations in the works, and therefore the sub-contractor might become entitled to recover loss and/or expense flowing from these instructions, notwithstanding that a change order was not issued. Issue No. 6 concerned the timing of notices of claim by the sub-contractor and in particular Condition 17, which stated "any claims ... for payments additional to those provided for in the sub-contract shall be submitted in writing .... within 10 days of the occurrence from which the claim arises. If no notification of a claim is received .... within 28 days of such date, then the said claim shall be automatically invalid." The Court held that this clause did not apply to claims for damages for breach of contract, as such a claim could not be a "claim for payment additional to those provided for in the sub-contract." Finally, Issue No. 7 dealt with whether claims for extension of time or for payments arising therefrom must be made timeously, otherwise the claim would have no contractual validity, which would free Johnson from an obligation to submit these claims up the line to LMK Joint Venture. The Court held that a failure by Maidenhead to comply with the time limit under the contract for making a claim did not by reason of that failure render the claim invalid. If that were to be the case, the Court held, one would have expected to see an expression such as "shall be automatically invalid" within the clause itself.
CJ-0607
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