Non-Payment of Interim Payments and the Choice of Forum

30 October, 2015
by: Cripps Pemberton Greenish

The recent Court of Appeal case of Wilson and Sharp Investments Ltd v Harbour View Developments Ltd [2015] EWCA Civ 1030 has highlighted the implications of choosing potentially the wrong forum when pursuing an employer for payment of interim payments due under a construction contract.

In this case, following the non-payment of two interim payment certificates the contractor threatened to present a winding-up petition against the employer. The employer applied for an injunction to prevent the contractor presenting the petition.

The contractor later became insolvent.

The Court of Appeal decided that because the contractor was insolvent, pursuant to the terms of the JCT Intermediate Building Contract with contractor’s design 2011 Edition agreed by the parties, the employer no longer had to fulfil its interim payment obligations. The employer may have had to later pay a balancing payment once a final account was prepared but based on re-valuations by a new contract administrator there were substantial disputes between the parties that could not be finally determined at that stage. The Court of Appeal decided that winding-up proceedings by their very nature were not the correct forum to examine the substantial disputes between the parties and so a permanent injunction restraining the contractor from presenting a winding-up petition was granted.

With the benefit of hindsight the contractor may have wished that it had addressed its interim payment dispute to adjudication. On the basis that the employer had failed to serve a pay-less notice the contractor would have been likely to get an adjudication decision in its favour. If it acted quickly it could then have enforced the decision in the TCC prior to its insolvency leaving the employer with a court order to pay the interim payments due and having to rely on later interim certificates or the final certificate as a basis to recover any overpayment.