Case summary: This is the first reported case since the House of Lords decision in Melville Dundas Limited (In Receivership) v George Wimpey UK Ltd (see our briefing note in May 2007). That case confirmed that, on a contractor insolvency under the JCT contract, the termination clause, which allows the employer to postpone making any further payments until he has quantified his losses, is perfectly enforceable, and in particular, is not defeated by the requirement in s.111 of the Housing Grants, Construction and Regeneration Act 1996 to serve a withholding notice. What was unclear was whether this applied only to terminations on insolvency, or to any termination. His Honour Judge Coulson QC confirmed the latter. Here the employer had terminated the contractor’s employment because of its failure to proceed regularly and diligently (the employer was however defeated on a secondary point, relating to clause 27.6.5.1 of the JCT 1998 Contract, because it had withheld a number of payments due over a period of some months without serving any withholding notices).

Comment: The Melville Dundas decision is an example of the court straining the words of the Construction Act in order to preserve a clause in the employer’s favour that has protected employers for many years. The judge was bound to follow its logic, but some will argue that the courts should not find ways around the Act merely to cater for what they see as deserving cases.

Pierce Design International Ltd v Mark Johnston & Anor (17/07/07)