Cases - S L Timber Systems Ltd v Carillion Construction Ltd
Record details
- Name
- S L Timber Systems Ltd v Carillion Construction Ltd
- Date
- [2001]
- Citation
- BLR 516
- Legislation
- Keywords
- Construction contracts - adjudication - adjudicator's decision - jurisdiction - extent/scope of jurisdiction - failure to serve withholding notice - whether decision a nullity/invalid - whether assertion of insolvency constituted defence to enforcement of award - Housing Grants, Construction and Regeneration Act 1996, sections 110 and 111
- Summary
-
This matter arose out of the enforcement of 3 adjudicators' decisions in relation to 3 claims on 3 contracts. Each of the claims related to the supply and erection of structural timber kits by S L Timber to Carillion. Carillion sought to resist the enforcement of the adjudicators' decisions on 2 grounds:
- They argued that the adjudicator had misunderstood the effect of sections 110 and 111 of the Act, that he fell into error, which led him to mistake the true scope of his jurisdiction.
- They sought to resist enforcement of the adjudicator's decision on the basis of the financial standing of S L Timber.
In relation to point (1), the adjudicator had concluded that because Carillion had not served notices pursuant to sections 110 and 111 of the Act that S L Timber were therefore entitled to payment of the sum applied for.
The judge concluded that the adjudicator fell into error by interpreting sections 110 and 111 of the Act as he had. The judge held that the adjudicator ought properly to have held that Carillion's failure to give a section 110 notice was irrelevant to the question of the scope for disputes about S L Timber's claims. However, the judge came to the conclusion that the adjudicator's error did not take him out of the proper scope of his jurisdiction. The adjudicator was asked to determine whether Carillion had failed to give a timeous notice of intention to withhold payment. He answered that question in the affirmative. The question that then arose for his consideration was whether, in that event, Carillion were obliged to pay the sums claimed. He addressed that question, and answered it too in the affirmative. His reason for giving that answer to that part of the issue before him lay in the view he took of the effect of section 111, a view that the judge held to be erroneous.
However, that was an erroneous answer that he gave after asking himself the right question, in the sense of the question referred to him for decision. The judge was therefore of the opinion that the adjudicator made an intra vires error rather than one that rendered his decision ultra vires. The adjudicator's decision was wrong, but not in such a way as to be invalid.
With regard to the solvency issue, the judge was reluctant to apply the reasoning in English decisions and concluded that Carillion's assertions to the effect that S L Timber were insolvent did not constitute a relevant defence.
Section 111 was declared not to be concerned with every refusal on the part of one party to pay a sum claimed by the other. The Court considered that the section was concerned with the situation where a sum is due under the contract, and the party by whom that sum is due seeks to withhold payment on some separate ground. If this were correct as a general proposition, then the employer who wished to rely upon arguments, amongst others, that (a) the work was not done at all, (b) the work was done defectively giving rise to abatement, or (c) there is no contractual entitlement for the work done, could do so without giving any notice to the contractor by way of notice of intention to withhold under section 111.
However, it has been clarified in Rupert Morgan that whilst this is not correct by way of general proposition, it remains the correct analysis if there is no contractual mechanism (such as certified interim certificates) which determines, for the purposes of the contract, what is 'due'. Lord MacFadyen's analysis may therefore be applicable where the facts of the case are similar.