Banner Holdings Ltd v Colchester Borough Council (No 2)

Under Conditions 57 and 58 of the GC/Works/1 contract, the value of work carried out must in principle be calculated by reference to the value of that work, not simply by reference to certified advance payments. Advance payments form part of the calculation of the second amount, whereas the value of work forms part of the third amount. However, a claim based on an alleged equation between payments and value should not be summarily dismissed if that equation is theoretically possible and has a realistic prospect of being established. The claimant must particularise the valuation case sufficiently to enable the defendant and its expert to understand and answer it.

The employer sought summary judgment against the contractor in proceedings concerning the financial consequences of the employer’s purported determination of a GC/Works/1 contract. The contractor contended that the determination should be treated as a determination at will and that its claim fell to be valued under Condition 58(5).

The employer argued that the contractor had pleaded no proper case for the value of work carried out under Condition 58(5)(a), because it relied principally on certified stage payments rather than a valuation of work actually executed. The central issue was whether that pleading was so misconceived that the quantum claim had no realistic prospect of success.

1. Summary judgment refused. The contractor’s quantum case was not struck out, although it required substantial further particularisation.
2. Under Conditions 57 and 58, the calculation of the third amount requires valuation of all work carried out in accordance with the contract. It is not, as a matter of principle, calculated by treating certified advance payments as equivalent to the value of work. The sums paid to date are relevant to the second amount.
3. That distinction did not make the pleaded claim hopeless. It was theoretically possible that the value of work at the relevant date matched the aggregate of the stage payments, although that was unlikely where the parties had adopted stage payments which were not calculated by reference to value.
4. The contemporaneous documents were ambiguous. They referred both to stage payments and to a percentage of the value of work executed. That evidence could support a realistic possibility that the payments and valuation coincided, but it could not be taken too far in the absence of evidence of a detailed interim valuation process.
5. The contractor was required urgently to provide a properly particularised case explaining the proposed equation between value and sums paid. A short-cut in presentation remained theoretically permissible, but it had to be intelligible to the opposing party and its expert. The adequacy of the equation, and whether examples demonstrated that there was no such equation, were matters for further evidence and determination.