Cases - Fenice Investements Inc v Jerram Falkus Construction Ltd
Record details
- Name
- Fenice Investements Inc v Jerram Falkus Construction Ltd
- Date
- [2009]
- Citation
- EWHC 3272 (TCC)
- Legislation
- Keywords
- Design and build - payment mechanism - construction of contract - contract amendments - hierarchy of terms
- Summary
-
Fenice Investements engaged Jerram Falkus Construction to design and construct residential properties and a commercial unit. Disputes arose in relation to Jerram Falkus Construction's application for interim payment and whether Fenice Investements had issued a withholding notice in time. The contract incorporated the JCT Design and Build Contract (revision 1, 2007) which had been the subject of certain amendments agreed between the parties.
The court concluded that the payment provisions in the employer's requirements were in conflict with the standard JCT conditions and the issue of which provisions took precedence was central to the question of whether a withholding notice had been issued on time. Under clauses 4.9 and 4.10 of the JCT conditions the payment mechanism was initiated by the contractor's interim application for payment. Under Section 15 of the employer's requirements the starting point of the payment mechanism was the issue of the interim certificate by the employer's agent. An interim certificate would only be issued after the contractor submitted a work valuation to the quantity surveyor and an interim valuation recommendation was issued by the quantity surveyor to the employer's agent. Under section 15 there was also no time limit specified between the application by the contractor to the quantity surveyor and the issue of the interim valuation recommendation meaning that the certainty and promptness envisaged by clauses 4.9 and 4.10 (which reflected the 1996 Construction Act) were lost.
The starting point of the payment mechanism was obviously crucial as it determined the dates for issuing withholding notices and the final date for payment. The court considered that section 15 made clauses 4.9 and 4.10 unworkable and that it had to choose between them. The court turned to clause 1.3 of the JCT conditions which was a hierarchy clause providing that the agreement was to be read as a whole but nothing contained in the other contract documents (including the employer's requirements) should override or modify the JCT conditions. The court stated that:
‘all other things being equal, a term specifically drafted for a particular contract will take precedence over a standard term (see Homburg Houtimport BV v Agrosin Private Ltd, The Starsin [2003] UKHL 12)…[however] this rule does not apply to every contract. The rule can be negated by express terms (see Gold v Patman and Fotheringham Ltd [1958] 2 All ER 497)’.
Clause 1.3 was held to negate the effect of the general rule and the JCT conditions took precedence. The payment mechanism was initiated by the contractor's interim application for payment which meant the withholding notice issued by Fenice Investements was too late and was invalid.
This case highlights the dangers of the parties amending standard form contracts to take into account the circumstances of the particular project they are working on. Care should be taken when drafting amendments to standard clauses to ensure the terms are harmonious with the standard terms or that they are given priority over the standard terms.