EMPLOYER NOT ENTITLEDTO WITHHOLD PAYMENT

Rupert Morgan Building Services (LLC) Ltd v Jervis [2003] EWCA Civ 1563, 12 November 2003

In Rupert Morgan Building Services (LLC) Ltd v Jervis [2003] EWCA Civ 1563, 12 November 2003, the Court of Appeal held that the defendant employers were not entitled to withhold payment from the claimant builders because they had not issued a valid notice of intention to withhold payment under s111(1) of the Housing Grants, Construction and Regeneration Act 1996 (hereafter ‘the 1996 Act’). The defendants submitted that they were not required to issue a notice of intention to withhold payment because the money withheld was not ‘due under the contract.’ The Court of Appeal held that, when deciding whether a sum is ‘due under the contract,’ the court must have regard to the terms of the contract between the parties. On the facts of the case it was the certificate issued by the architect which determined when and how much was to be paid by the employer and, a certificate having been issued, the money was ‘due under the contract’ and the employer was not entitled to withhold payment unless it had issued a notice under s111 (which it had not). The position would have been otherwise had the sum been due on an event such as completion of the works because, in such a case, no money would have been ‘due’ until completion and so, pending completion, no money would have been ‘due under the contract’ so as to trigger the operation of s111.