This was an appeal to the House of Lords by a contractor, L Brown & Sons (“Brown”) against a Court of Appeal decision which had held that Brown had not been entitled to determine a contract (JCT Standard Form 1998 edition) between it and the respondent employer, Reinwood Limited (“Reinwood”), on the basis that Reinwood had unfairly withheld a sum which was due under the contract. There was a specified completion date as well as provisions for extensions of time (“EOT”), damages for non-completion and the right of the contractor to determine the contract on certain specified defaults by Reinwood.

Brown applied for an EOT in December 2005. The architect issued a certificate of non-completion and an interim certificate for payment in which the final date for payment was 26 January 2006. On 17 January, Reinwood issued a withholding notice based on the LADs resulting from the issue of the Certificate of Non-Completion and paid the remainder of the certificate in 20 January.

On 23 January the architect issued an EOT. The following day Brown ordered Reinwood to pay the outstanding balance of the payment certificate by the final date for payment. Reinwood did not pay by the due date and citing this as a specified default under the contract Brown determined its employment. Brown submitted that Reinwood was entitled to rely on the Certificate of Non-Completion at the time it served the Withholding Notice. However, Reinwood had lost that entitlement by the final date for payment since it could no longer rely on the Certificate of Non-Completion as a basis for withholding payment from Brown.

The Court of Appeal held that Reinwood’s right to LADs crystallized at the time of the Withholding Notice thus upholding its right to levy LADs. The effect of the EOT meant that the balance of the damages properly due to Brown should be paid in a reasonable time though not by the final date for payment. This Court of Appeal decision was reported in a previous Briefing.

What was the effect of the grant of an EOT after the date of issue of the interim certificate but before the final date for payment on the withholding notice issued by Reinwood?