JSM Construction Ltd v Western Power Distribution (West Midlands) Plc

Under section 110(1)(a) of the Housing Grants, Construction & Regeneration Act 1996, the question is whether the payment mechanism in the particular construction contract adequately determines what payments become due and when. The statute does not necessarily require a separate final-account procedure. Adequacy is assessed holistically and is fact-sensitive, depending on the contract and the nature of the works. A mechanism may be adequate even if it provides only for periodic payments, although a complex project may require a more structured regime. On an application to strike out or for summary judgment, the court should not finally determine disputed factual and legal issues where the adequacy question cannot be resolved conclusively on the available material.

JSM Construction Limited claimed a final balance and damages under a contract with Western Power Distribution (West Midlands) plc for installing underground electricity cables. The contract provided for monthly interim payments, but contained no express final-account provision. JSM alleged that the design and pricing mechanism were inadequate and relied on section 110 of the Housing Grants, Construction & Regeneration Act 1996 and the Scheme for Construction Contracts to imply a final-payment term.

Western Power applied under CPR r.3.4(2)(a) to strike out the claim, alternatively for summary judgment under Part 24, arguing that the contractual payment regime was adequate and that JSM had no entitlement to submit a final application. The central issue was whether the claim was legally hopeless or had no real prospect of success.

1. The application to strike out the claim under CPR r.3.4(2)(a), or alternatively for summary judgment under Part 24, was dismissed. Strike-out is exceptional and requires certainty that the pleaded claim is bound to fail. Summary judgment requires there to be no real prospect of success and no other compelling reason for trial; the court must avoid a mini-trial.
2. Section 109 of the Housing Grants, Construction & Regeneration Act 1996 concerns stage or interim payments. Section 110(1)(a) is broader. It requires a holistic assessment of whether the contractual mechanism adequately determines payments due and the dates on which they become due. Section 110 does not necessarily require a separate final-account provision.
3. The statutory Scheme is not a prescribed model against which every contract must be judged. The absence of one or more Scheme provisions does not itself establish inadequacy. A simple fixed-price contract with defined stage payments might be adequate without a separate valuation process, whereas complex works may require a more structured mechanism.
4. Adequacy is a value judgment and essentially fact-sensitive. The court could not resolve on this application the disputed issues concerning the design, the allocation of risk, and whether the Pricing Schedule was capable of valuing the works. It therefore could not conclude that JSM’s proposed final-payment claim was hopeless or lacked a realistic prospect of success.