Everwarm Ltd v BN Rendering Ltd

A contractual assessment clause permitting recovery of overpayments may operate alongside the interim-payment and final-account machinery in a construction contract. It must, however, be exercised in accordance with the contract and not arbitrarily, capriciously or irrationally. Where the contract lacks statutory payment-notice or final-date provisions, the relevant provisions of the Scheme for Construction Contracts are imported. A defective assessment is unenforceable, but the clause itself need not be struck down. A payment claim must identify both the sum said to be due and the basis of calculation. Failure to provide the required notices does not prevent a valid contractual or statutory payment regime from operating.

Everwarm and BN entered into 38 labour-only subcontracts for external wall insulation works in Scotland. Some were oral, one was partly oral and partly written, and later contracts were written on Everwarm’s Rev 7 or Rev 8 terms.

Everwarm claimed repayment of alleged overpayments under clause 4.9, relying on assessments prepared by Turner & Townsend. BN counterclaimed for final-account sums and the release of retention. The principal issues concerned incorporation of contractual terms, the validity of the clause 4.9 assessments, compliance with the Housing Grants, Construction and Regeneration Act 1996, the adequacy of BN’s payment claims, and entitlement to retention.

1. Contract terms. The Rev 7 and Rev 8 terms were not incorporated into the oral subcontracts. A single earlier contract containing written terms did not establish a sufficient course of dealing. Clause 1.2 could not incorporate itself into later oral agreements without evidence of consent. RANDCHA was subject to the 2013 terms, while the later written subcontracts were subject to the revision physically supplied with each order.
2. Oral contracts and additional work. The oral subcontracts included an implied term that additional work was payable at an agreed rate or, if no rate was agreed, for a reasonable sum. The alleged agreed method of adding 1 m² for each window or door opening was not proved. Render-only work to reveals was included in the elevation rate; insulation installed in sufficiently large reveals was additional work payable at a reasonable sum.
3. Clause 4.9. Clause 4.9 was a valid corrective-payment mechanism operating alongside the interim-payment and final-account provisions. It could be used after completion of the works but before completion of the final-account process. An assessment had to relate to the relevant subcontract, comply with the contractual valuation provisions, and satisfy an implied term against arbitrary, capricious or irrational exercise. Everwarm’s blanket percentage reductions, inadequate sampling, exclusion of variations and failure to account for retention breached those requirements. Its claims under clause 4.9 therefore failed.
4. Statutory payment regime. Clause 4.9 did not itself provide all notices and final-date provisions required by the Housing Grants, Construction and Regeneration Act 1996. The relevant provisions of the Scheme were consequently imported. The clause remained enforceable and did not undermine the other payment provisions. It was also reasonable under the Unfair Contract Terms Act 1977.
5. BN’s final-account claims. BN’s one-page statements did not provide sufficient detail or identify the basis on which the claimed sums were calculated. They therefore did not establish notified sums under the statutory regime. The final-account counterclaim failed.
6. Retention. The oral and written subcontracts provided for release of retention 12 months after completion. BN made valid demands for the written-subcontract retentions by its solicitors’ letter of 15 April 2019. Everwarm could not rely on an unpleaded set-off defence. Judgment was entered for BN for £406,015.90 plus VAT of £81,203.18.

Everwarm’s claim, including its claim for interest, was dismissed.