Trilogy Services Scotland v Windsor Residential [2017] SAC (Civ) 2

This is a Scottish payment case that was heard through the courts. In November 2014, Windsor entered into a fixed price “construction contract” (as defined by the HGCRA), the terms of which were set out on one sheet of A4 paper. The Scheme therefore applied. The contract provided for payment by four separate instalments. There was no dispute that Trilogy completed the works required of them in relation to the first three instalments and that they were paid for those works. A dispute arose over whether Trilogy had completed the fourth. Trilogy said they had and in July 2015 made an application for payment.

No s. 110A(3) notice was given by Windsor specifying the sum that they considered to be due; the work to which the payment related; or the basis upon which that sum was calculated. This failure meant that it was open to Trilogy, to give Windsor such a notice. That notice could be given at any time after the date on which the payer ought to have given notice.

On 9 October 2015, demands were sent by Trilogy’s solicitors to Windsor. The letter was accompanied by a copy of the outstanding invoice dated 16 July 2015. It was asserted that payment was due and that previous demands for payment had been ignored. The letter ended with a threat to raise proceedings for recovery in the absence of payment. No payment was made and proceedings were commenced. The issue for the court was whether the solicitor’s letter could constitute a notice under s. 110A(3) of the HGCRA. A notice complies with s. 110A(3) if it specifies the sum that the payee considers to be, or to have been, due at the payment due date in respect of the payment; and the basis upon which that sum is calculated. The solicitor’s letter complied with all this.

However, Windsor argued that a party serving such a notice had to make it clear that it was applying for payment. A considerable degree of clarity was needed that an application was a notice under HGCRA before it could legally be one. In short, it could not have been the intention of the author of the letters that they be notices under the HGCRA.

Here the Sheriff Appeal Court considered that Trilogy were not required to demonstrate that it was their intention to give notice under the HGCRA. The court was referred to the English decision of Henia Investments Inc v Beck Interiors Ltd (Issue 183) where Mr Justice Akenhead said that it must be clear that, in substance, form and intent, that what was being given was a complaint notice. The Scottish court noted that it was not surprising that the claims in the Henia case failed. Henia had sought to take advantage of “what could be described as a lack of clarity in their own documentation.” That was not the position here.

Trilogy’s position was that they had completed the works necessary to entitle them to the fourth instalment and accordingly they had made an application for payment of that amount under the contract. No notice was given and the solicitor’s letter complied in form and substance with the requirements of the HGCRA. It probably assisted Trilogy’s case that the letter had appended to it a copy of the original application. There could be no doubt about their intentions. They wanted to be paid.

Put another way, what would Windsor have thought on receiving the letter? That Trilogy wanted to be paid the sums requested in its application for payment sent some three months previously. The Sheriff Appeal Court, looking more at the substance of the documents than their form, duly held that the solicitor’s letter was not a letter written as a notice which was said to be in accordance with s.110A(3) of the HGCRA, but its content meant that it was a valid notice under s. 110A(3) of the HGCRA.

The sting in the tail for Trilogy was that this dispute, over payment of £14,000, had taken some 18 months to reach a conclusion, not least because the apparent lack of clarity in Trilogy’s notices, had given Windsor something to argue about.