Retention as a security

In Relicpride Building Co Ltd v Cordara [2013] EWCA Civ 158, [2013] All ER (D) 135 (Mar) the Court of Appeal held that the purpose of a clause making provision for a retention by the employer was to give to the employer security by ensuring that there was to be available to the employer a sum from which it could indemnify itself in respect of any loss or damage suffered as a result of the contractor failing to discharge its contractual obligations. In the event that the conditions for the return of the retention were not fulfilled within a reasonable time, the employer was held to be entitled to an indemnity in respect of any loss or damage suffered as a consequence, but the balance of the retention was then payable to the contractor as the outstanding part of the purchase price. It was held not to be the intention of the parties that the stakeholder should retain the retention in perpetuity, nor was it repayable to the employer.