Witholding payment

The Case

There were a number of issues before the court. The first was whether or not the claimant's application for payment was valid and whether the engineer's certificate was valid.

Second, the court was required to consider whether or not the failure to send the certificate to the correct party was a failure that resulted in prejudice.

Finally the court was asked to consider whether or not there was any point that could be said to raise a real dispute or difference so that the case should be sisted for arbitration.

Reference

It was held it was incorrect to say that the application had to contain supporting information which was objectively sufficient. It was up to the engineer to decide what information was appropriate and whether or not he should grant a certificate. In relation to the engineer's certificate it was held that this was a valid certificate; it identified the amount due and required payment of that amount less any amounts paid. Furthermore, it was in precisely the same form as the previous engineer's certificates.

The certificate was not sent or received by the defendant. However, it was held that if there was a failure to send the certificate to the correct party, it was a failure that did not result in any prejudice and no remotely arguable case had been put forward that the defendant was misled or prejudiced in any way.

It was accepted by Lord Glennie that where there is a binding reference to arbitration, the proper course is to sist the case until it has been settled by arbitration. The defendant has a right to such an order whenever an action has been brought by someone who is a party to an arbitration agreement. However, the formulation adopted was that the jurisdiction of the arbiter should only be ousted by the court if there is no basis upon which a two-sided dispute can be identified.

Lord Glennie formed the view that the defendant did not raise any points which could be said to raise a real dispute or difference so that the case should be sisted for arbitration.

This is another timely reminder to all that there is no entitlement to withhold payment of a sum that is due unless effective notice has been given. This is a strict requirement of the act. If no notice is given at all there is no right to withhold payment. If a notice is given but is defective in some way, for example being out of time, again there is no right to withhold payment.