Machenair Ltd v Gill & Wilkinson Ltd

A construction sub-sub-contract may require the employer to complete the works within a reasonable time, assessed by reference to the main contractor’s programme and all relevant circumstances. Where the contract contains no valuation mechanism for variations, an implied term may require payment of a reasonable sum for additional work requested by the employer.

Failure to serve a withholding notice under Housing Grants, Construction and Regeneration Act 1996, section 111, prevents reliance on set-off but does not extinguish an otherwise valid counterclaim. A delay claim fails where the contractor proves completion within a reasonable time, having regard to additional work and delays caused by others.

Machenair Ltd carried out mechanical works for Gill and Wilkinson Ltd as a labour-only sub-sub-contractor on the refurbishment of Macaulay Hall. The dispute concerned the final account, payment for variations, and Gill’s counterclaim for delay, damage and other alleged losses.

The court determined the contractual terms, the valuation of 42 variation items, the effect of Gill’s failure to serve a withholding notice, and whether Machenair was responsible for delay or other claimed losses.

1. Contractual terms. Gill’s standard conditions were not incorporated. The purchase orders and quotations formed the sub-sub-contract, whose express terms were sparse. Gill was under an obligation, express or implied, to complete the mechanical works within a reasonable time. Reasonable time was to be assessed by reference to the main contractor’s programme and all the circumstances.
2. Variations. Since the contract contained no valuation provision, there was an implied term that Machenair would receive a reasonable sum for additional work carried out at Gill’s request where the price had not been agreed in advance. A mark-up of 110 per cent was appropriate. Time-based valuation was permissible in this labour-only contract, and it was reasonable for work to be performed and charged at a foreman’s rate. Claims for attending meetings and additional payment for weekend working were rejected.
3. Counterclaim. Section 111 of the Housing Grants, Construction and Regeneration Act 1996 excluded Gill’s right of set-off arising from the failure to serve a withholding notice, but did not bar an otherwise valid claim. Gill’s delay claim failed because Machenair completed within a reasonable time. Delay resulted substantially from additional work, late installation of the IPS system, late delivery of water heaters, and a late instruction concerning extra valves. Other heads of counterclaim were not proved, save for £500 for clearing up. The claimed 15 per cent mark-up was not recoverable as damages.
4. Outcome. The value of the Macaulay Hall works and variations, less the counterclaim, produced a net balance of £23,179 excluding VAT. Including VAT and the agreed balance for the Wildlife Trust Centre, judgment was entered for Machenair in the sum of £32,854, subject to subsequent determination of interest.

Not an appellate decision. No prior appellate history was stated in the judgment.