Levi Solicitors LLP v Wilson
In the recent High Court case of Levi Solicitors LLP v Wilson, the Court grappled with issues around ‘termination accounts’ submitted pursuant to clause 6.7.3 of the JCT Minor Works Building Contract; both in the context of insolvency, and generally.
The headline finding by the Court was that the three-month deadline for submitting a statement/certificate under clause 6.7.3 (a termination account) is not a strict deadline intended to preclude recovery if not met, but instead merely marks the date upon which such a statement/certificate becomes ‘late’, therefore triggering an opportunity for the party which was otherwise due to receive it to act (e.g., commence proceedings).
The point is an important one, but its scope is rather narrow. It applies only to the termination account, and only where that account is determined pursuant to a provision which is the same or similar to clause 6.7.3 of the JCT Minor Works Building Contract.
Of potentially wider consequence is the finding by the Court that the payment contractually due under the termination regime is not a payment which is subject to the usual payment related requirements set out in the Housing Grants, Construction and Regeneration Act 1996 (as amended) (“the Construction Act”), at all.
This ground-breaking decision by the Court is difficult to reconcile with Section 110A(1) of the Construction Act, which clearly defines an all-encompassing scope:
A construction contract shall, in relation to every payment provided for by the contract—
(a) require the payer or a specified person to give a notice complying with subsection (2) to the payee not later than five days after the payment due date, or
(b) require the payee to give a notice complying with subsection (3) to the payer or a specified person not later than five days after the payment due date.”
This apparent deviation is significant enough in the context of the termination account, but what of its wider implications? Is the deviation limited specifically to such termination account payments, or does it extend to other ‘one off’ payments due under a contract?
What about retention?
As the second tranche of retention payment is a “payment provided for by the contract”, the statutory authority appears to suggest that a notice (in default or otherwise) must be issued before the sum actually becomes payable.
In the light of the decision in Levi however, there seem to be good grounds for arguing that in fact the retention monies simply become payable upon the necessary contractual criteria being met (typically the effluxion of time), without the need for any triggering application/notice.
This would certainly simplify matters; especially when it comes to unusually long retention periods, or to unscrupulous employers looking to keep hold of money that bit longer by introducing extra hurdles.
Time will tell how the Courts come to apply the decision in Levi. In the meantime, it shall remain the prudent course always to play it safe when it comes to payment.
If in doubt, issue an application/notice.