Sisk & Son Ltd v Carmel Building Services Ltd (in administration)
Building contract – Interim payment – Arbitration – Claimant contractor entering into sub-contract with defendant incorporating JCT Conditions of sub-contract – Defendant entering administration – Claimant terminating sub-contract – Defendant claiming sums due to it from claimant – Adjudicator making award in favour of defendant – Claimant appealing – Whether arbitrator erring in burden of proof – Whether arbitrator erring in rejecting claimant’s primary claim – Whether defendant being entitled to statutory interest – Appeal dismissed
The claimant contractor was engaged to construct a nine-storey reinforced concrete frame mixed-use building at 41-51 Bolsover Street, London for the creation of forty apartments, together with a new Outpatients Department for the Royal National Orthopaedic Hospital. By a sub-contract, the defendant company entered into an agreement with the claimant to carry out the supply and installation of mechanical and electrical services on the project. The contract expressly incorporated the JCT Conditions of Sub-Contract SBCSub/C2005 Rev 1 2007. Clause 7.7.4 of the conditions set out provisions in the event of the defendant’s employment being terminated. Clause 4.10.5 dealt with amounts due under interim payments. Clause 15.9 provided for the payment of interest of the claimant failed “properly to pay the amount, or any part of it, due to the sub-contractor … by the final date for its payment”. Payment of such interest was to be treated as a debt due to the defendant by the claimant.
The defendant submitted an application for interim payment to the claimant but entered administration and ceased work under the sub-contract. The claimant terminated the sub-contract pursuant to clause 7.5.1 of the JCT Conditions. The defendant subsequently gave notice of arbitration in respect of the sums due to it. The claimant’s position was that, on a proper operation of clause 7.7.4, no sum was due to the defendant. The defendant asked for statutory interest in accordance with the Debts Act (Interest) 1988. Having determined what was due to the claimant under clause 7.7.4 by way of set-off, the arbitrator awarded the defendant £975,965.48, together with VAT, compensation for late payment (in the sum of £100) and interest on the late payment in the sum of £359,329.10. He held that clause 15.9 provided an optional regime for the payment of interest which was not an adequate remedy as defined by the Late Payment of Commercial Debts (Interest) Act 1998, and so had to be declared void. Accordingly, there was no contractual remedy for late payment and the provisions of the 1998 Act were implemented.
Building contract – Interim payment – Arbitration – Claimant contractor entering into sub-contract with defendant incorporating JCT Conditions of sub-contract – Defendant entering administration – Claimant terminating sub-contract – Defendant claiming sums due to it from claimant – Adjudicator making award in favour of defendant – Claimant appealing – Whether arbitrator erring in burden of proof – Whether arbitrator erring in rejecting claimant’s primary claim – Whether defendant being entitled to statutory interest – Appeal dismissed
The claimant contractor was engaged to construct a nine-storey reinforced concrete frame mixed-use building at 41-51 Bolsover Street, London for the creation of forty apartments, together with a new Outpatients Department for the Royal National Orthopaedic Hospital. By a sub-contract, the defendant company entered into an agreement with the claimant to carry out the supply and installation of mechanical and electrical services on the project. The contract expressly incorporated the JCT Conditions of Sub-Contract SBCSub/C2005 Rev 1 2007. Clause 7.7.4 of the conditions set out provisions in the event of the defendant’s employment being terminated. Clause 4.10.5 dealt with amounts due under interim payments. Clause 15.9 provided for the payment of interest of the claimant failed “properly to pay the amount, or any part of it, due to the sub-contractor … by the final date for its payment”. Payment of such interest was to be treated as a debt due to the defendant by the claimant.
The defendant submitted an application for interim payment to the claimant but entered administration and ceased work under the sub-contract. The claimant terminated the sub-contract pursuant to clause 7.5.1 of the JCT Conditions. The defendant subsequently gave notice of arbitration in respect of the sums due to it. The claimant’s position was that, on a proper operation of clause 7.7.4, no sum was due to the defendant. The defendant asked for statutory interest in accordance with the Debts Act (Interest) 1988. Having determined what was due to the claimant under clause 7.7.4 by way of set-off, the arbitrator awarded the defendant £975,965.48, together with VAT, compensation for late payment (in the sum of £100) and interest on the late payment in the sum of £359,329.10. He held that clause 15.9 provided an optional regime for the payment of interest which was not an adequate remedy as defined by the Late Payment of Commercial Debts (Interest) Act 1998, and so had to be declared void. Accordingly, there was no contractual remedy for late payment and the provisions of the 1998 Act were implemented.
The claimant appealed by way of Part 8 proceedings pursuant to section 69 of the Arbitration Act 1996, seeking variation or remission of the award. The claimant contended that the arbitrator erred in law in relation to: (i) the burden of proof in relation to the defendant’s claim under clause 7.7.4; (ii) whether the claimant’s primary claim to set-off under clause 7.7.4 was a global claim and thus irrecoverable; and (iii) the rate of interest to be applied to sums awarded to the defendant.
Held: The appeal was dismissed.
(1) There had been no material error of law in the arbitrator’s approach to the burden of proof in relation to the defendant’s claim and there was no basis for interference with the arbitrator’s decision on that issue. The arbitrator’s conclusions had not turned on any misapplication of some evidential burden. Rather he was deciding whether or not the defendant had carried out work to a value for which it had not yet been paid, and if so to what extent, issues on which he correctly understood at all times the legal burden of proof to lie on the defendant.
(2) Fairly read, the arbitrator’s decision had not treated global and total costs claims as separate concepts, and then treated the claimant’s primary claim as a total costs claim, even though it was a global claim. He found as a matter of fact, on the basis of all the evidence, that the claimant had failed to prove its primary claim. At the very least, it was not clear that the arbitrator had been under the impression that global and total costs claims were different animals, falling to be treated differently. The fact that he had gone on to deal with the added evidential difficulties relating to global or costs claims was consistent with him doing no more than addressing fully the parties’ submissions on the law. Accordingly, there was no merit in the second challenge to the award: Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 (TCC); [2012] PLSCS 189 applied.
(3) Clause 4.10 dealt exclusively with the amounts due by way of interim payment in accordance with clause 4.9, and then interest in the event of late payment of such amounts. Clause 4.10.5 related only to payment of interest on interim payments which was reflected in the fact that it operated by reference to terms of art defined by reference to interim payments only. Equally, the reference in clause 4.10.5 to the fact that acceptance of any payment should not be construed as a waiver of the right to suspend performance was specific to interim payments only, arising in the context of ongoing performance obligations. Even if clause 4.10.5 was operative, it did not provide for the payment of interest by the defendant on anything other than late payments of amounts due to the claimant by way of interim payment under clause 4.10. Thus the provisions of the 1988 Act were to be implied. Read in the appropriate context, it was clear that the reference to “these conditions” in clause 4.10.5 had to be a reference to the conditions in clause 4 for interim payments, and not more widely so as to encompass clause 7.7.4. If clause 4.10.5 was not wide enough to cover interest payments for late payment of a final payment under clause 4.12, where there was at least the parallel concept of a final date for payment, then it could not be properly read as wide enough to cover interest payments for late payment under clause 7.7.4.
Adrian Williamson QC (instructed by Weightmans LLP) appeared for the claimant; Lord Marks QC (instructed by CJ Hough & Co Ltd, of Horsham, West Sussex) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read transcript: Sisk & Son Ltd v Carmel Building Services Ltd (in administration)
