Rupert Morgan Building Services (Llc) Ltd. v Jervis & Anor

Housing, Grants (Construction and Regeneration) Act 1996 s.111(1) is a cash-flow measure. It requires prompt payment of a sum which has become due under the contract unless an effective withholding notice has been given in time. It does not make an interim or final certificate conclusive, or finally determine the parties’ underlying rights.

Whether a sum is due depends on the contractual payment mechanism. Where an architect’s certificate contractually determines the amount and date for payment, the certified sum must be paid despite a later dispute about the work, subject to the payer’s right to challenge liability and recover any overpayment later.

The builders sought summary judgment for the disputed balance of a seventh interim certificate issued under an ASI building contract. The clients accepted part of the certificate but alleged that the balance included work not done, duplicate charges, contractual work wrongly treated as extras, and snagging items.

No notice of intention to withhold payment had been served within the prescribed period. District Judge Murphy’s decision was upheld on appeal by His Honour Judge Anthony Thompson QC in Winchester County Court. The clients appealed to the Court of Appeal on the proper construction of s.111(1) of the Housing, Grants (Construction and Regeneration) Act 1996.

Appeal dismissed. Lord Justice Jacob gave the reasons, with which Lord Justice Sedley and Lord Justice Schiemann agreed.

1. Housing, Grants (Construction and Regeneration) Act 1996 s.111(1) addresses cash flow, not the ultimate allocation of contractual liability. A failure to serve a timely withholding notice prevents withholding a sum which is due under the contract. It does not create an irrebuttable presumption that the certified sum is ultimately payable, nor does it override a contractual term that certificates are not conclusive.
2. The expression “sum due under the contract” must be determined by the contract’s payment mechanism. Under this contract, the architect’s certificate fixed both the amount due and its payment date. The certified amount was therefore due even if the clients alleged that particular work had not been done, had been charged twice, or had been wrongly valued. In the absence of an effective notice, they could not withhold it.
3. The court followed the analysis in Clark Contracts v The Burrell Co [2002] SLT 103. It distinguished SL Timber Systems v Carillion Construction [2001] BLR 516, where a builder’s unexamined bill did not itself trigger a contractual obligation to pay and the fact of performance determined whether payment was due.
4. The clients retained remedies after payment. An overpayment could be corrected in a later certificate, or pursued through adjudication, arbitration or legal proceedings. The appropriate immediate result, however, was payment of the certified balance.

• Court of Appeal (Civil Division) — dismissed the clients’ appeal: absent an effective withholding notice, they had to pay the disputed balance of the interim certificate ([2003] EWCA Civ 1563 ).
• Winchester County Court — His Honour Judge Anthony Thompson QC dismissed the clients’ appeal from District Judge Murphy.