Maxi Construction Ltd v Mortons Rolls Ltd [2001] Outer Ct of Session

This summary was provided by CMS Cameron McKenna LLP.

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To constitute a claim for payment pursuant to paragraph 12 of the Scheme the relevant application must be an application for payment, not simply an application for valuation and certification. It must also state the basis on which the payment claimed was calculated.

Lord Macfadyen, Outer House, Court of Session

7 August 2001

MC carried out certain construction works for MR. The contract between the parties was a construction contract within the meaning of HGCR Act 1996. MC contended they were entitled to an interim payment on the basis of a document they called "Application for Payment 10" and decree de plano (judgment granted in all respects) should be pronounced. MR contended that the document relied on by MC did not constitute an application for an interim payment. However, MR accepted that if the document did constitute an application for payment, MC would be entitled to decree de plano.

MC submitted that a clause in the contract did not comply with the requirements of s 110/111 of HGCR Act as there was an inconsistency between the sub-clauses; this did not comply with the requirement in s110(a) for an adequate method of determining what payments would become due (and when they would become due) under the contract. MC further submitted that their application for payment in the form of "Application for Payment 10" constituted the making of a claim as payee (which under paragraph 4 of the Scheme meant payment became due) as it was a written notice and specified:

the amount of payment due;
to what the payment related; and
the basis on which it was calculated. MC contended that since no notice of intention to withhold payment had been timeously given, MC were entitled to decree de plano.

MR submitted that the document on which MC relied (in fact called "Interim Valuation No. 10"), when read with the covering letter, did not constitute either a "claim by the payee" within the meaning of paragraph 12 of the Scheme, or an "Application for Interim Payment" under the contract; it sought valuation and certification rather than payment. They submitted MC were therefore not entitled to decree de plano.

The judge held that the only issue to be determined was whether the documents on which MC relied was to be regarded as a "claim by the payee" within the meaning of paragraph 12 of the Scheme. The judge noted that the contract made a clear distinction between the agreement of the valuation and the subsequent payment of the sum agreed to be due. It was found that from the terms of the covering letter to the document on which MC relied that MC did not intend that when it was submitted it would operate as a claim for payment. In addition, the judge held that "Application for Payment 10" did not specify the basis on which the payment claimed was calculated, as required by paragraph 12 of the Scheme. MC were therefore not entitled to decree de plano.

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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