Windglass Windows v Capital Skyline Construction & London & City Group Holdings [2009] EWHC 2022

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An adjudicator had not exceeded his jurisdiction by finding that it was a requirement that the grounds for withholding payment set out in a withholding notice issued pursuant to the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”) should be valid for that notice to be effective.  A defendant in an adjudication cannot rely on a cross-claim which has not been the subject of a withholding notice.

Technology and Construction Court, Mr Justice Coulson


Capital Skyline Construction Ltd (“Capital”) engaged Windglass Windows Ltd (“Windglass”) to supply and install glazing.  London and City Group Holdings Ltd (“LCGH”) was Capital’s parent company.  Capital's letter of instruction to Windglass asked them to proceed with the works.  It said that Capital “with the guarantee of its parent company” authorised Windglass to proceed with the works. The letter stated that LCGH undertook to pay all sums due to Windglass.  The letter made provision for the signatures of Capital, LCGH, and Windglass.

The contract did not provide an adequate mechanism for determining either what interim payments became due under the contract or when they became due for payment.  Accordingly the mechanism set out in the Scheme for Construction Contracts (the “Scheme”) was implied into the contract between the parties.  There was a dispute between the parties as to whether Windglass had agreed to make its applications for interim payment in a particular form.  Capital refused to make interim payments to Windglass, citing an alleged failure to comply with this supposed agreement.  Windglass referred its unpaid claims to adjudication.  The adjudicator found that there was no agreement that the applications should be in a particular format.  The adjudicator also found that Capital had failed to issue any effective notices of payment and/or withholding notices under the scheme, so Capital was not entitled to raise any set-off or cross claim either for defects or delay.  Capital did not pay the sums awarded by the adjudicator.   Windglass made an application for summary judgment to enforce the adjudicator’s decision against both Capital and LCGH.


As against Capital: whether the adjudicator had exceeded his jurisdiction when he concluded that the withholding notices were invalid on the grounds that Capital had not set out valid grounds for withholding.  Capital argued that the Construction Act does not require that the grounds for withholding payment set out in the notice be valid for that notice to be an effective withholding notice.

As against LCGH:

  • Whether the letter of instruction was an unsigned guarantee and therefore unenforceable by virtue of s.14 of the Statute of Frauds.
  • Whether the letter of instruction was put forward without LCGH’s authority.
  • Whether, on the basis that a judgment or an arbitration award to which he was not a party cannot bind a surety, LCGH could not be bound by the result in the adjudication to which it was not a party.

In response to LCGH’s submissions Windglass argued:

  • The typed words in the letter of instruction were sufficient to serve as a signature, alternatively a signed e-mail received from LCGH was sufficient to act as a signature.
  • Alternatively, the letter was not a guarantee, but an indemnity, in respect of which the Statute of Frauds point would not apply.
  • The argument about the lack of authority would depend on oral evidence and the Court had no discretion to grant summary judgment in those circumstances.

The lawyers for both parties informed the Court that there was no authority of which they were aware in which an adjudicator's decision has been held to be binding on a surety. They therefore requested that the hearing of any application against LCGH should be adjourned so as to allow sufficient time to allow that point to be addressed.


The Court found:

  • To be effective a withholding notice must be in writing and must be issued a requisite time before the final date for payment.  The courts will take a practical view of the contents of a withholding notice and will not allow complaints as to form which might be described as artificial and contrived.
  • It is important to differentiate between withholding notices under s.111 of the Construction Act and notice of payment due under s.110. The latter notice is supposed to come first in time and is the mechanism by which the main contractor tells the sub-contractor what he is prepared to pay by way of interim payment and why. It is a separate stage from the withholding notice under s.111 in which the main contractor has to set out any sum being withheld and the reasons for withholding.
  • In the present case, there were no notices under s.110.  However, the parties had agreed that, in accordance with Rupert Morgan Building Services v Jervis [2004] 1 WLR 1867, the absence of a s.110 notice did not, without more, entitle Windglass to the sums claimed in their interim applications. Those sums could still be adjusted, if appropriate, to reflect the true value of the work done and the materials supplied. 
  • The adjudicator decided that: (a) Effective withholding notices were needed if the sums otherwise due by way of interim payment were to be reduced or not paid at all by reason of cross-claim for defects and delay; (b) There were no such withholding notices; (c) The cross-claim for defects and delay could not be raised as a defence to the claim for interim payments in the absence of valid withholding notices. The adjudicator had acted within his jurisdiction when making his decision.  He decided those issues against Capital.  His decision on these issues was temporarily binding and could not be the subject of the court's interference: see Quartzelec Ltd v Honeywell Control Systems Ltd [2008] EWHC 3315 (TCC) and Letchworth Roofing Company v Sterling Building Company [2009] EWHC 1119 (TCC).
  • Section 111 of the 1996 Act and the relevant part of the Scheme require that the withholding notice sets out valid grounds for withholding money otherwise due.  There was no meaningful distinction between a “valid” notice and an “effective” notice.
  • The adjudicator decided that Capital’s withholding notices were ineffective because they did not identify the amounts proposed to be withheld and the grounds for withholding them as required by s.111 of the Construction Act.  He was plainly right to reach the conclusion that he did (though the Court acknowledged that this was not strictly relevant, because the Court has now power to review the adjudicator’s decision). 
  • Even if the adjudicator should have looked at and taken into account Capital’s alleged counterclaim for defects and delay, the counterclaim was so weak that it could not operate as a valid set-off and counterclaim in any event.  If there was any sort of difficulty with jurisdiction, or there had been any sort of alleged breach of natural justice, then that default was technical only and had no effect whatsoever on the outcome of either the adjudication or the application for enforcement: see Cantillon v Urvasco.
  • The 1996 Act does not permit a party to put in an ineffective withholding notice and then, in a subsequent adjudication, seek to put together an entirely different justification for withholding payment.
  • A defendant can raise whatever matters he likes by way of defence for the adjudicator to consider, but that general principle does not permit a defendant to rely on a cross-claim which should have been the subject of a withholding notice, but was not.  A defendant cannot avoid the absence of a valid withholding notice if, by reference to the contract and on the facts of the particular dispute, the raising of the cross-claim in question required such a notice. To hold otherwise would be to obviate the need for withholding notices at all (see also Coulson J’s judgment in Letchworth).
  • The issue relating to LCGH was likely to be time-consuming and would, in any event, be academic if Capital paid the judgment sum.  Accordingly the claim against LCGH would be adjourned.

This summary was provided by CMS Cameron McKenna LLP.

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