Millers v Nobles Construction Ltd [2001] TCC 64/00

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

A letter recording an oral agreement may be sufficient evidence of a contract for the purposes of s107 of the 1996 Act even if it has not been authorised by both parties.  Deductions from monies otherwise payable under a construction contract – whether by way of set-off or abatement - are not permissible unless a s111 notice has been served.

HHJ Gilliland, Salford County Court

3 August 2001

M applied for summary judgment on the grounds that N had no real prospect of successfully defending the claim. M claimed for payment for goods and joinery services supplied to N under 10 separate invoices. Each invoice stated that payment was due 30 days after the invoice was issued.

M contended that the contract between the parties was a "construction contract" within section 104 of HGCR Act 1996. M asserted that N did not give any effective notice of intention to withhold payment under the invoices within the period of 7 days before the invoices became due for payment and that accordingly, under section 111 of the 1996 Act, N was not entitled to withhold payment of the invoices.

N submitted firstly that Part II of the 1996 Act (and therefore section 111) had no application to the agreement between the parties as Part II only applies to construction contracts in writing within section 107 of the Act and this agreement was neither in writing or evidenced in writing. Secondly N contended that no notice of withholding needed to be given as the sums were not "due under the contract" as they amounted to a double charge and were therefore not sums payable under the contract. Thirdly N submitted that it had a defence to M's claim on the merits and M's claim should therefore not be dealt with by way of summary judgment.

The judge held that the agreement between the parties was clearly an agreement for the carrying out of "construction operations" within section 105 of the 1996 Act. The judge did not accept that the agreement was not evidenced in writing. He accepted that the letter written by N's quantity surveyor, which referred to an oral agreement between N and M, was not written with the authority of both parties (as required by s107(4) of the 1996 Act) but found that s107(4) does not set out an exhaustive list of what "evidenced in writing" means. A letter from one party recording what had been orally agreed between the parties was sufficient to constitute a contract "evidenced in writing" and therefore Part II of the 1996 Act was applicable to the agreement.

In relation to the claimed adjustment for the double charge, the judge said that when considering the meaning of the words "due under the contract" it was important to look at the sum from which the deduction was sought to be made. If the sums claimed by the party seeking payment were due under the contract, then the effect of section 111(1) was to prevent the paying party from withholding payment if he had not given the requisite notice of intention to withhold payment. Under the terms agreed between the parties, payment of invoices submitted was due within 30 days of the date of the relevant invoices. The sums sought to be retained in respect of overpayments which had already been made were caught by s111 and therefore a withholding notice had to be served in relation to them. The fact that the deductions sought to be made might be characterised as an equitable set-off or an abatement did not affect this.

The Judge granted summary judgment to M. He said that, as all the judgment amounted to was a finding that as N had not served s111 notices it could not deduct from payment of the invoices the previous overpayment, N was not prevented from bringing a claim against M at a later date in respect of those overpayments.

A letter recording an oral agreement may be sufficient evidence of a contract for the purposes of s107 of the 1996 Act even if it has not been authorised by both parties. Deductions from monies otherwise payable under a construction contract – whether by way of set-off or abatement - are not permissible unless a s111 notice has been served.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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