PC Harrington Contractors Limited v Multiplex Constructions (UK) Limited
Case reference:
[2007] EWHC 2833 (TCC)
Friday, 30 November 2007
Key terms: Declaration – Pending Adjudication – Interim Payment – Interim Payment Mechanics – Section 110 – Section 111 – Amounts “Due” – Valuation Machinery
The Claimant, PC Harrington Contractors Limited, carried out work at the new Wembley National Stadium for Multiplex Constructions (UK) Limited. Multiplex claimed that Harrington’s work included defects. As a result, Multiplex began an adjudication in relation to the alleged defects to the floors. Harrington argued that they would clearly be due payment in respect of those items at the outset of the adjudication because of the valuation machinery in the contract.
Clause 21 dealt with valuation, and provided a typical interim valuation process. The contractor was to issue a certificate identifying amounts due to the sub-contractor, less any deductions. Clause 21.10 provided the contractor to deduct any amounts of abatement. Clause 21.11 provided for withholding notices such that both an amount, as well as a ground for withholding that specific amount, was to be identified.
As a result, Multiplex valued the work gross, including the contract value of the floors, and then deducted amounts in respect of the alleged defects to it.
Harrington argued that the valuation procedure was effectively a three-stage process. First, to identify the sums due for Harrington’s work. Second, to determine any deduction and withholding and then finally, to compute the amounts to be paid. On this basis, they argued that Multiplex clearly owed Harrington the value of the floors by virtue of the first stage. They were, as it were, in credit from the moment the adjudication began such that Multiplex could not claim any monetary sum back from them in respect of the floor.
Christopher Clarke J. held that a purposive approach needed to be applied to the entirety of clause 21. The mechanics required a process for arriving at a sum to be paid. The first part of that process was identifying amounts due, before then considering any deductions. A series of calculations were required in order to identify a final figure. No amount was payable to Harrington until that process had been completed. It could not be said that Multiplex by simply recognising that the sum in the floors would be due under the first stage, had to pay Harrington without further considering the rest of the application of clause 21.
In addition, the withholding mechanics of clause 21 complied with the Housing Grants, Construction and Regeneration Act 1996, and so the entire mechanism of clause 21 did not fall foul of the Act.
As a result, the declaration was not granted, and Harrington could not start the adjudication “with £2.3 million in-hand”.
Clause 21 dealt with valuation, and provided a typical interim valuation process. The contractor was to issue a certificate identifying amounts due to the sub-contractor, less any deductions. Clause 21.10 provided the contractor to deduct any amounts of abatement. Clause 21.11 provided for withholding notices such that both an amount, as well as a ground for withholding that specific amount, was to be identified.
As a result, Multiplex valued the work gross, including the contract value of the floors, and then deducted amounts in respect of the alleged defects to it.
Harrington argued that the valuation procedure was effectively a three-stage process. First, to identify the sums due for Harrington’s work. Second, to determine any deduction and withholding and then finally, to compute the amounts to be paid. On this basis, they argued that Multiplex clearly owed Harrington the value of the floors by virtue of the first stage. They were, as it were, in credit from the moment the adjudication began such that Multiplex could not claim any monetary sum back from them in respect of the floor.
Christopher Clarke J. held that a purposive approach needed to be applied to the entirety of clause 21. The mechanics required a process for arriving at a sum to be paid. The first part of that process was identifying amounts due, before then considering any deductions. A series of calculations were required in order to identify a final figure. No amount was payable to Harrington until that process had been completed. It could not be said that Multiplex by simply recognising that the sum in the floors would be due under the first stage, had to pay Harrington without further considering the rest of the application of clause 21.
In addition, the withholding mechanics of clause 21 complied with the Housing Grants, Construction and Regeneration Act 1996, and so the entire mechanism of clause 21 did not fall foul of the Act.
As a result, the declaration was not granted, and Harrington could not start the adjudication “with £2.3 million in-hand”.