Dr Jones Yeovil Ltd v The Stepping Stone Group Ltd

A contractual retention remains retention money unless the contract clearly provides otherwise. Where the contract specifies when it may be withheld, the employer cannot keep it indefinitely by failing to issue the relevant certificate or final statement. The court may treat a certificate as issued where it ought to have been issued.

An agreement to negotiate deductions and a later settlement figure is not binding where essential terms remain subject to agreement. A claim for transferred loss requires a known third-party benefit and legal necessity to avoid a legal black hole. Express exclusion of third-party rights may defeat that basis. The principle does not generally extend to pure economic loss suffered by third parties where the contracting party has suffered no corresponding loss.

The claimant building contractor carried out works for the defendant property developer under three construction contracts. The defendant withheld part of the retention under two contracts and counterclaimed for losses concerning heat pumps, carpets, insulation, Japanese knotweed, snagging and warranties.

The parties had discussed deductions and a possible settlement at a December 2014 meeting, but no final agreement was reached. The central issues were whether the retained sums had fallen due, whether the December discussions altered the contractual payment machinery, and whether the defendant could recover losses allegedly suffered by residents or a related company.

1. Retention. The retained 2.5% remained part of the contractual Retention. Clause 4.18.3 governed the period for which it could be deducted, and clause 4.16 preserved the debtor-creditor relationship. The absence of a Final Statement or Making Good Certificate did not place the debt in limbo.
2. The reasoning in Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 WLR 3850 permitted the court to treat a certificate which ought to have been issued as having been issued. The Making Good Certificates should have been issued no later than 24 May 2016. The defendant therefore had no defence to the retention claim, subject to any proved set-off or counterclaim.
3. The December 2014 discussions amounted only to an agreement to agree. The email used conditional and incomplete language, including references to matters being subject to agreement. It did not displace the payment provisions in the contracts or create an enforceable agreement for compensation.
4. The counterclaim failed on liability and quantum. The defendant did not establish the alleged representation or warranty concerning the comparative efficiency of air-source and ground-source heat pumps. The replacement ASHPs complied with the varied contractual requirements. The evidence concerning electricity consumption was unreliable, and a proper comparison would have required dynamic thermal modelling rather than the adopted MCS calculations.
5. The claims concerning carpets, insulation, Japanese knotweed, snagging and ASHP warranties were also unproved. The defendant failed to establish contractual breach, recoverable loss, or a sufficient evidential basis for the sums claimed.
6. The transferred-loss claim failed. The contracts expressly excluded enforcement by non-parties, so there was no common intention to benefit future leaseholders. The claim for residents’ electricity costs was also a claim for pure economic loss suffered by third parties, not loss suffered by the defendant.
7. Judgment was entered for the claimant for £39,481.16, contractual interest of £10,668.86, and £1,181.63 for VAT with interest of £488.64. The counterclaim was dismissed. Costs and any permission-to-appeal application were dealt with by consequential directions.

First-instance decision. No earlier appellate decision was stated in the judgment.