Cases - Melville Dundas Ltd (in receivership) v George Wimpey UK Ltd [2005]
Record details
- Name
- Melville Dundas Ltd (in receivership) v George Wimpey UK Ltd
- Date
- [2005]; [2005]
- Citation
- CSIH88; ADR.L.R. 12/15
- Legislation
- Keywords
- Contract - construction contract - payment - interim payments - withholding notices - insolvency - whether a party was entitled to withhold payment in the absence of a valid withholding notice where the contract expressly provided that where one party went into receivership that the provisions of the contract which required any further payment or any release or further release of retention to the contractor would not apply - Housing Grants, Construction and Regeneration Act 1996, section 111(1) - JCT Standard Form with Contractors' Design (1998) edition - Pre-LDEDCA: meaning of ‘sum due’ - insolvency of contractor
- Summary
-
Melville Dundas were employed by Wimpey. The contract was in the JCT Standard Form with Contractors' Design (1998) edition. On 2 May 2003 MD applied for an interim payment of £396,630. It was accepted that the sum was due and that the final date for payment was 16 May 2003. Wimpey did not pay. On 22 May 2003 MD went into receivership. They had very substantial debts. The receivers claimed payment of the sum of £396,630.
Wimpey relied on clause 27.6.5.1 of the contract, which provided that, when one party went into receivership, the provisions of this contract which required any further payment or any release or further release of retention to the contractor would not apply.
The receivers then contended that these contractual provisions were contrary to s.111(1) of the Housing Grants, Construction and Regeneration Act (HGCRA) 1996. The House of Lords (3:2) allowed Wimpey's appeal against the decision of the Inner House, and decided that Wimpey was entitled to withhold the payment and that there was no conflict with the provisions of the HGCRA 1996 such as would preclude withholding. Lord Hoffmann, doubting whether Parliament can have taken into account that parties might enter into contracts where a contractual ground for withholding payment might arise after the final date for payment, said that (para. 22):
'... section 111(1) should be construed as not applying to a lawful ground for withholding payment of which it was in the nature of things not possible for notice to have been given within the statutory time frame...'
The minority view was expressed by Lord Neuberger as follows:
'... section 111(1) prohibits the appellant from "withhold[ing] payment ..." after "the final date for payment of a sum due under the contract". [...] Accordingly, in so far as clause 27.6.5.1 has the effect of permitting the appellant to withhold payment of the sum, it is purporting to permit that which s. 111(1) prohibits. Therefore, to that extent, it is ineffective.'