Case notes

Too poor to be paid

Obviously, disputes can wreak havoc on a small company’s finances. But consider the cheek of a loser who refuses to pay – get this – because the winner is so impoverished that, should the loser appeal, he’d never get his money back!

This happened to Wimbledon Construction Company (WCC). In 2002, WCC started work on a contract of £209,941 to refurbish a house belonging to Derek Vago. Disputes arose and an adjudication started in January 2005.

The adjudicator awarded WCC £123,000. Vago didn’t pay and WCC sought to have the decision enforced.

Vago said he wouldn’t pay because he was in arbitration with WCC on another matter. What if he paid, then won the arbitration? WCC sailed so close to the wind that it couldn’t afford to give the money back.

He cited a large loan a WCC director had had to give his own company, and pointed out WCC’s significant loss in 2003/4. He also produced an accountant’s analysis of WCC’s accounts, which alleged WCC was technically insolvent.

WCC hit back, saying that its loss was only due to Vago’s non-payment, and that anyway, it was now making a modest profit.

The judge agreed, ordered Vago to pay and refused to stay the order until the arbitration had been completed.

Moral: You’ve got to pay the pauper!

Case: Wimbledon Construction Company 2000 Ltd. - v - Derek Vago. TCC - May 20, 2005 [Bliss IB 24/1]

Time waits for no one

Under a contract there are only six years to take legal action. So when years go by between starting and completing the final account, it’s easy to forget the clock is ticking.

In this case, Boot was the main civil contractor for a power station for Alstom in North Wales.

Work had started in April 1994. Boot submitted its final account in stages ending on 29 June, 2001.

Boot had a number of claims. These included ones for valuations going back to the start of the job, such as unforeseen ground conditions. Also, Boot was claiming interest on payments, under clause 60 (7), that it said the engineer should have certified during the job.

The engineer issued the final certificate on 9 October, 2002 for £44.43m.

Alstom was not happy. It thought that most of Boot’s claims related to events over six years earlier and the engineer should not have included them in his certificate.

Nor was Boot happy. Alstom was withholding at least £2.9m that had been due under the engineer’s certificate.

Alstom took Boot to arbitration. The arbitrator held that most of Boot’s claims were too old. Boot appealed to court. The court carefully considered when rights of action actually arose. It distinguished between a right to payment under an interim valuation for work done and under the valuation for the final account.

The court held that Boot had a separate cause of action for underpayment in the final account and therefore its work-based claims were within time.

However, when it came to claims for interest on underpayment for the old interim valuations under clause 60 (7), the cause had only arisen when the work was first undervalued.

Thus, Boot’s interest claims, which were for some £3.9m, were time-barred.

Moral: Check those dates on long jobs

Case: Henry Boot Construction Ltd. - v - Alstom Combined Cycles Ltd, Court of Appeal June 16, 2005. [Bliss IB 29/5].

Call that a contract?

In March we covered the case of Bryen & Langley v. a Mr Boston, where B&L lost an attempt to enforce an adjudication because a JCT Contract hadn’t been signed? It hinged on the fact that, as a residential occupier, Boston and the dispute fell outside the reach of the Construction Act.

Well, the story didn’t end there. B&L lost more than £65,000, so, not surprisingly, it appealed… and won.

Here’s why. Boston engaged a QS, who invited tenders in 2001 based on a JCT Contract. B&L was the lowest.

The QS wrote a letter to B&L setting out the price of £436,923, time of 16 weeks, noting the contract would be JCT (although there were some gaps and options left undecided in the JCT form). He added that Boston would offer a bonus of £2,000 for each week the contract date was brought forward. Although B&L neither countersigned nor replied to that letter, it promptly started work. All subsequent actions and documents and certificates assumed that a JCT Contract was in place.

The Court of Appeal unanimously agreed that a JCT Contract had been formed by B&L’s acceptance of the QS’s letter, even though there were some contract details and variations, such as the floor and completion bonus, still to be agreed.

Therefore, the adjudication had been valid.

Moral: Actions speak louder than signatures

Case: Bryen & Langley - V - Martin Boston. Court of Appeal, 29 July, 2005 [Bliss IB 30.1]