Wilson and Sharp Investments Ltd v Harbour View Developments Ltd

[2015] EWCA Civ 1030

Here four interim certificates had been issued totalling £1.2 million. Wilson, the Employer, only paid one. Further, it had not issued payless notices for the outstanding ones. Harbour suspended its work and both parties served notices of termination. Harbour then issued a winding-up petition and Wilson sought an injunction to restrain presentation of the petition claiming that it was disputed on substantial grounds and that Wilson had serious and genuine cross-claims that exceeded the sums allegedly due.  It is not known why Harbour did not seek to use adjudication. Before the first hearing, Harbour gave notice that a meeting of creditors was to be held for the purposes of appointing a liquidator.

The contract was the JCT Intermediate Building Contract with Contractor’s Design 2011. Clause 8.5.3 of that contract noted that as from the date a contractor becomes insolvent, whether or not the employer has given notice of termination, clause 8.7.3 would apply as if such notice had been given. Clause 8.7.3 noted that an employer need not pay any sum that has already become due if the contractor, after the last date upon which a payless notice could have been given, has become insolvent.

The CA agreed that this meant that the proposed petition debt, based on the sums set out in the interim payment certificates, was genuinely disputed as, given the provisions of clause 8.7.3 mentioned above, such sums were no longer payable after the respondent entered into the creditor’s voluntary liquidation. 

Lady Justice Gloster also noted that an employer who accepts that interim payments have become due because of a failure to serve a payless notice, is not prejudiced by this when it seeks to raise a serious and genuine cross-claim. The fact that interim payments had fallen due under the HGCRA, because of the failure to issue a payless notice, did not prevent Wilson from challenging the valuation at a later date or raising a cross-claim in response to a winding-up petition, provided that it could demonstrate that its cross-claims were reasonably arguable and sufficiently strong to be tested in court proceedings.

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