The recent Court of Appeal case of Wilson
and Sharp Investments Ltd v Harbour View Developments Ltd [2015] EWCA Civ 1030 has
highlighted the implications of choosing potentially the wrong forum when
pursuing an employer for payment of interim payments due under a construction
contract.
In this case, following the
non-payment of two interim payment certificates the contractor threatened to
present a winding-up petition against the employer. The employer applied
for an injunction to prevent the contractor presenting the petition.
The contractor later became
insolvent.
The Court of Appeal decided that
because the contractor was insolvent, pursuant to the terms of the JCT
Intermediate Building Contract with contractor's design 2011 Edition agreed by
the parties, the employer no longer had to fulfil its interim payment
obligations. The employer may have had to later pay a balancing payment
once a final account was prepared but based on re-valuations by a new contract
administrator there were substantial disputes between the parties that could
not be finally determined at that stage. The Court of Appeal decided that
winding-up proceedings by their very nature were not the correct forum to
examine the substantial disputes between the parties and so a permanent
injunction restraining the contractor from presenting a winding-up petition was
granted.
With the benefit of hindsight the
contractor may have wished that it had addressed its interim payment dispute to
adjudication. On the basis that the employer had failed to serve a
pay-less notice the contractor would have been likely to get an adjudication
decision in its favour. If it acted quickly it could then have enforced
the decision in the TCC prior to its insolvency leaving the employer with a
court order to pay the interim payments due and having to rely on later interim
certificates or the final certificate as a basis to recover any overpayment.
