Windglass Windows Ltd v Capital Skyline Construction Ltd & Anr [2009] EWHC 2022(TCC)

Capital engaged Windglass to supply and install windows. The sub- contract did not contain an adequate mechanism, in accordance with the HGCRA, for determining what payments were due and when. Accordingly the relevant provisions of the Scheme were implied into the sub-contract. A dispute arose between the parties concerning unpaid interim valuations. Capital who had only replied to these valuations on two occasions, said that they would not process the applications because they were not in the appropriate format and had not been signed by Capital’s site manager. The withholding notices were in the following form:

“Our financial director has returned this application and is not willing to process this amount due to insu? cient supporting information. Please note that our company policy is such that each sub-contractor valuation must be presented in a standard format, copy attached, and authorised by the appropriate site manager before your application can be processed. Could you kindly re-present your application with the correct supporting information…..”

Windglass referred the dispute to adjudication, where they were awarded £152k. Capital did not pay and Windglass sought to enforce the decision. Capital argued that the adjudicator had exceeded his jurisdiction in deciding that the withholding notices were invalid because they did not include valid grounds for withholding. Capital argued that the HGCRA does not require the grounds for withholding to be valid for the notice to be e! ective. Mr Justice Coulson held that Capital were wrong for four reasons:

  1. In deciding that the notices were invalid, and that any cross claims raised as defences to the notices must fail as a consequence, the adjudicator had answered the issues put to him. This was within his jurisdiction and the Judge queried whether this was a jurisdictional point in any event;
  2. The argument that the HGCRA did not require the grounds for withholding to be valid was wrong. The Judge disagreed that, as long as there was something which purports to be a withholding notice, then that is su" cient to justify withholding, regardless of content.. There was no meaningful distinction between a ‘valid’ or an ‘e! ective’ notice in s111;
  3. The adjudicator provided reasons as to why the withholding notices were not e! ective: neither the amount proposed to be withheld nor the grounds for doing so were set out; and
  4. Even if the adjudicator should have taken the alleged counterclaim into account, it was so vague, unparticularised and unlinked to the terms of the subcontract that it could not operate as a valid set-o! to the withholding notices.  

Capital also submitted that their withholding notices could act as a ‘gateway’ through which they could gain an entitlement to raise defences in the adjudication not previously raised. The Judge disagreed on the basis that the HGCRA does not permit someone to put in an ine! ective withholding notice to get around the requirements of the HGCRA, and to then introduce entirely di! erent arguments at a later date. The decision was duly enforced.