Hills Electrical & Mechanical Plc -v- Dawn Construction Limited
Case reference:
[2004] ScotCS 107
Monday, 7 April 2003
Key terms: Payment Regime - The Scheme - Payment Terms - Payment Period
This case does not relate directly to adjudication, but deals with the interplay of the contractual provisions and the Scheme in respect of payment. Hills Electrical were seeking a payment of £93,364.93 as a sum due to them under a construction contract entered into with Dawn Construction Limited. The Employer under the Main Contract with Dawn Construction Limited had gone into administration on or around 10th October 2000. Hills argued that the Contract between them and Dawn failed to provide dates on which the sub-contractor should make applications for payment in order that they could be then incorporated in the Main Contractor's application. The Contract also contained a "payment certified" stipulation in respect of the Main Contract.
Hills argued that both of these conditions failed to comply with the Act, and as a result interim payments were to be made in accordance with the Scheme. On the other hand, Dawn argued that simply because a construction contract was deficient in respect of some matters regarding payment that did not mean that the whole Scheme applied. The Scheme only applied in order to fill the gaps in the payment regime. They argued that the parties had agreed that the final date for payment was 28 days after the date on which it became due.
Lord Clarke referred to section 109 (9) of the Act which said that the parties were free to agree the amounts of the payment and the intervals at which those payments became due. The parties were also free to agree payment periods (section 110 (1)), and the period for the serving of a withholding notice (section 111(3)). It was only in the absence of that agreement that the Scheme applied, thus filling the gaps. In support of this analysis, he referred to Paragraph 1 of Part II of the Scheme which provided that it was only the "relevant provisions" that applied rather than all of the provisions regarding payment. These words also appeared at Paragraph 3 of Part II of the Scheme. The final date for payment was therefore 28 days after the due date as set out in the contract. As the final dated was 28 days, rather than the 17 days contended by Hills, then Hills case became irrelevant and the action was dismissed.
Hills argued that both of these conditions failed to comply with the Act, and as a result interim payments were to be made in accordance with the Scheme. On the other hand, Dawn argued that simply because a construction contract was deficient in respect of some matters regarding payment that did not mean that the whole Scheme applied. The Scheme only applied in order to fill the gaps in the payment regime. They argued that the parties had agreed that the final date for payment was 28 days after the date on which it became due.
Lord Clarke referred to section 109 (9) of the Act which said that the parties were free to agree the amounts of the payment and the intervals at which those payments became due. The parties were also free to agree payment periods (section 110 (1)), and the period for the serving of a withholding notice (section 111(3)). It was only in the absence of that agreement that the Scheme applied, thus filling the gaps. In support of this analysis, he referred to Paragraph 1 of Part II of the Scheme which provided that it was only the "relevant provisions" that applied rather than all of the provisions regarding payment. These words also appeared at Paragraph 3 of Part II of the Scheme. The final date for payment was therefore 28 days after the due date as set out in the contract. As the final dated was 28 days, rather than the 17 days contended by Hills, then Hills case became irrelevant and the action was dismissed.