A Contractor was retained by an Employer under a standard Design & Build JCT Contract. The Contractor served three applications for interim payment (the Applications) on the Employer. In respect of the first two Applications, the Employer served a “Payment Notice” on the Contractor out of time and on the third, no Payment Notice was served.
Under the contract, this meant that, unless the Employer served a “Pay Less” Notice on the Contractor, which the Employer failed to do in respect of any of the Applications, the amounts claimed in the Applications were due and owing.
The Employer failed to pay the amounts due pursuant to the Applications and the Contractor walked off site and terminated the contract, as it was entitled to do.
The Contractor then served a statutory demand for the amounts claimed. The Employer applied to restrain presentation of a winding up petition by the Contractor on the grounds that the debt was disputed and/or it had a counterclaim.
The Judge found that, in the above circumstances, the debt was due and owing and that the Contractor had adhered to the terms of the contract.
On the counterclaim, the Judge held that the Employer had failed to adduce evidence sufficient to demonstrate that there was a genuine and substantial counterclaim. As the Judge put it, “There is simply no evidence before me that that is so”. The Employer’s application was therefore dismissed.
Whilst construction proceedings are famed for their disputes and counterclaims, this case reminds parties that they need to be up to speed with their contractual rights, particularly in light of the tight deadlines, and cannot simply hope that the winding route will not be followed or the court will restrain presentation of a petition. Parties should assert their contractual rights and take advantage of the adjudication process, wherever possible.