Systems Pipework Ltd v Rotary Building Services Ltd

Where a construction contract provides that a notified figure becomes binding unless challenged within a specified period, the notice must clearly identify the amount said to be due and the contractual provision relied upon. A valuation of the work, without identifying the balance payable after relevant deductions, is insufficient. The recipient is not required to calculate the notified sum from other documents. Such provisions have potentially draconian consequences and require strict compliance with their terms. Where the contract provides for dissent from a notified figure, the issue is ordinarily binary. A general written dissent may prevent the notification from becoming binding; the contract will not be treated as permitting partial notification, partial dissent or partial deemed agreement unless it clearly says so.

The claimant subcontractor carried out mechanical and electrical works for the defendant main contractor. The subcontract contained a final-account procedure under which the contractor was to assess or value the proper amount due. Unless the notification was dissented from in writing within 14 days, the notified figure would be deemed agreed and binding.

The defendant sent a document described as a final-account assessment. It compared the parties’ valuations but did not identify a balance due, refer to the contractual notice provision, or account for previous payments and retention. The claimant later commenced adjudication concerning part of the works. The adjudicator held that the claimant was not bound by the whole assessment but was bound by the remainder. The claimant sought declarations in these proceedings on the proper construction and operation of the final-account provisions.

1. Construction of clause 28.6. Applying the principles in Arnold v Britton [2015] AC 1619 and Wood v Capita Insurance Co [2017] UKSC 24, the required notification was the proper amount due for payment in respect of the Final Account. It was not merely the gross value of the works.
2. The assessment had two elements: valuation of the total amount payable for the subcontract works, and calculation of the amount due after previous payments and any applicable retention. The distinction between gross valuation and the sum due was maintained throughout the subcontract.
3. Requirement for clear notice. The 2 September 2016 document was not a valid notification. It described itself as a final-account assessment, did not state any particular sum as due and payable, did not refer to clause 28.6, and omitted deductions such as previous payments and retention. The claimant was not required to calculate the amount from other documents, particularly where some documents postdated the alleged notice or came from the defendant.
4. The authorities concerning strict notice requirements and the loss of contractual rights, including Caledonian Modular Limited v Mar City Developments Limited [2015] BLR 694, Henia Investments Inc v Beck Interiors Limited [2015] BLR 704, Severfield (UK) Limited v Duro Felguera UK Limited [2015] EWHC 3352 (TCC), Jawaby Property Investment Limited v The Interiors Group Limited [2016] BLR 328 and Surrey and Sussex Healthcare NHS Trust v Logan Construction (Southeast) Limited [2017] EWHC 17 (TCC), applied with particular force because the alleged consequence concerned final-account rights.
5. Alternative finding on dissent. If there had been a valid notification, the claimant’s written dissent by commencing adjudication prevented the notified figure from becoming actually or deemed agreed. Clause 28.6 did not provide for partial dissent or partial deemed agreement. The assessment was expressed as one figure for all works, and the dissent therefore prevented the binding mechanism from operating as a whole.
6. All three issues were decided in favour of the claimant.