Standard forms are supposed to make things easy, but that wasn’t exactly the builder’s experience in Reinwood vs Brown. Maybe it’s time the whole lot were taken for a ride …
There, I knew it all along. JCT98 is as plain as a judge’s pikestaff. Said the Lord Justice of Appeal: “In my view, the machinery provided by the contract is clear and straightforward, and produces a workable and commercial scheme.” Two more Court of Appeal judges sitting alongside said: “I agree.”
Trouble is, I have the feeling that if, instead of asking three tip-top judges, you asked three tip-top builders (or 30 or 300), they’d say: “Bugger, I can’t make head nor tail of what these documents do, or say, or intend.”
And as much as I love to bits all the form makers at JCT and even at NEC, we really ought to scrap the lot. Start afresh. We might even get the new prime minister to spread his tentacles of “change” into these over-complicated so-called standard forms.
And yet, appeal judges find them straightforward. I wonder if they would find plastering complicated?
The Court of Appeal on 21 June explained a building case called Reinwood vs L Brown & Sons. It’s easy to understand. Brown, the builder, became peeved. It said the employer had underpaid and it walked. Out went the chippies, plasterers and plumbers. In came the form wranglers. Standard forms gleam and pong like a dead mackerel on the quayside in the moonlight. Now comes the arguing.
“The form says this.”
“No, no, the form says that.”
The folk arguing for the employer, Reinwood, said it had not underpaid. If that was correct, the builder was not only wrong to walk, but it would be liable for all the costs and consequences of the employer having to get another builder to complete the job. So, was it underpaid or not?
Out go the workers. In come the form wranglers. Standard forms gleam and pong like a dead mackerel in the moonlight
The amount due under JCT is what the architect certifies. But according to JCT, the amount due isn’t necessarily the amount payable. Did I hear a groan? The reason is that the employer can deduct liquidated damages from the architect’s certified sum if the contractor has failed to complete the works by the date for completion.
This was what the so-called underpayment was all about. Reinwood deducted £62k in liquidated damages; Brown argued that the true figure was £12k. The High Court judge said Brown was right. The three judges in the Court of Appeal said it was wrong, and they painstakingly explained how obvious it was.
Three ingredients are necessary to deduct liquidated damages. First, the architect must issue a certificate of non-completion. It had. Second, the employer must inform the contractor in writing of its intention to require payment of liquidated damages. It did. Third it must issue the withholding notice not later than five days before the “final date for payment”. This was done.
Then the cheque was posted with a £62k deduction to account for the completion of the block of flats five weeks late.
But then the wheels came off. Just before the cheque was due, the architect quite properly wiggled the extension of time machinery in JCT and awarded another four weeks. So, instead of five weeks’ liquidated damages, it was now only one. Can you see why the builder complained about being underpaid? And can you see why the first judge agreed? I bet all construction folk see the force of that. I nearly called it common sense. And it is right – except for a “but”.
The but crops up when you ask this question: what’s the score when the three ingredients are carried out but the architect trumps its certificate of non-completion by later awarding an extension of time?
The Court of Appeal said once the three ingredients were in place, particularly the employer’s withholding notice, the system had “crystallised” the right to rely on those pieces of paper.
The £62k deduction was not an underpayment and the builder had no room for complaint – technically. On the final date for payment, the cheque was right. Mind you, it does seem that the employer was bound to repay all but £12k of the £62k deduction.
I have not one jot of criticism of the Court of Appeal. Down here, though, we only see things as builders, plasterers, plumbers and High Court judges. Don’t you think builders’ forms ought to be written so that builders can understand them?
Tony Bingham is a barrister and arbitrator