Thomas Vale Construction Plc v Brookside Syston Ltd

A determination of a building contract’s Final Account does not necessarily make the balance immediately payable. Where a supplemental agreement fixes only the earliest date for payment and leaves the contract’s payment machinery in force, payment remains subject to later contractual conditions. An employer may still serve a contractually compliant withholding notice under the interim-payment or Final Account provisions. Such a notice should be read as practical communication of the reason for withholding, without fine textual analysis, provided the ground is sufficiently clear. On a Part 8 application, untested evidence about defects generally cannot be resolved against the notice. Minor items outside an agreed snagging list will not invalidate it where substantial remaining defects are shown.

Thomas Vale Construction plc, a building contractor, applied under Part 8 for a declaration that a withholding notice served by Brookside Syston Ltd was invalid. The parties’ JCT building contract was supplemented by an agreement addressing practical completion, snagging, delay damages and the Final Account. An expert determined that practical completion had occurred but that numerous snagging items remained. An adjudicator later determined the value of the Final Account, and the defendant served a notice withholding the amount certified as payable.

The central issues were whether determination of the Final Account triggered an immediate payment obligation, whether the contractual withholding provisions remained effective, and whether the notice was invalid because of its wording, the defects relied upon, or the alleged set-off of an untested counterclaim.

1. Application dismissed. The contractor was not entitled to a declaration that the withholding notice was invalid.
2. The Supplemental Agreement adopted a twin-track approach. It expressly provided when agreed delay damages were payable, but clause 7 established only the earliest date at which payment could be made. It did not make determination of the Final Account an automatic trigger for payment.
3. The payment machinery in the Building Contract continued to operate. Under clause 30.3.1.2, payment was not due until the latest of the specified contractual events, and those events had not all occurred. The issue of an interim certificate, expressly issued without prejudice to the employer’s position, did not alter that conclusion.
4. Alternatively, even if payment had become due, clauses 30.3.4 and 30.6.2 entitled the employer to serve a withholding notice identifying the amount, grounds and allocation of the withholding. Those provisions had not been displaced by the Supplemental Agreement.
5. The notice was not to be subjected to fine textual analysis. Its purpose was to communicate why payment was being withheld. It was sufficiently clear that the withholding arose because work remained incomplete and defects had not been remedied. The contractor’s attempt to characterise the claim solely as damages for delay in following the remedial programme was artificial.
6. On the Part 8 procedure, the evidence concerning the defects and their cost had not been tested. The court could not conclude that the facts relied upon in the notice were incorrect and proceeded, for the purposes of the application, on the assumption that the reports were accurate. The small number of items outside the expert’s snagging list were de minimis and did not invalidate the notice where substantial remaining remedial costs were indicated.
7. The Final Account determination did not establish that a sum was due for immediate payment. The withholding was therefore not an impermissible set-off of a disputed and untested counterclaim.

not stated in the judgment.