The defendants, Mr and Mrs Johnston, engaged the claimant contractor, Pierce Design International Limited, to carry out construction works at the property. The contract incorporated the JCT Standard Form of Building Contract (With Contractor’s Design), 1998 edition.

During the contract the defendants failed to make interim payments to the claimant in accordance with clause 30.3.3 of the contract. The unpaid sums totalled £93,460.33 plus interest.

The works were not completed by the contractual completion date and the defendants complained about defective and incomplete works. They served a notice of default, pursuant to clause 27.2.1 of the JCT conditions, notifying the claimant that it was not proceeding regularly and diligently with the construction work. The defendants alleged that the default was not remedied and purported to determine the employment of the claimant. That determination was disputed.

Before the court, the claimant contended that clause 27.6.5.1 of the JCT contract, which allowed the employer not to pay a sum due despite the absence of a withholding notice, fell outside section 111 of the Construction Act and that the case of Melville Dundas Ltd (In Receivership) v George Wimpey UK Ltd (2007) should be limited to its facts. Even if the clause was in accordance with section 111, the proviso in it operated to prevent the defendants from resisting the claimant’s application for sums due under the contract on the basis that it had been “unreasonably not paid” as there had been no appropriate withholding notice.

Two issues arose:

a) Whether, on the facts of the case, clause 27.6.5.1 fell foul of Section 111 of the act, because it purported to allow sums to be withheld without the serving of a withholding notice; and

b) Whether, assuming clause 27.6.5.1 was in accordance with section 111, the proviso in clause 27.6.5.1 operated to prevent the defendants from resisting the claimant’s application for the sums due under the contract on that basis that those sums have been “unreasonably not paid” by the defendants.