Williams v Williams

It is conceivable that a contractor might in an exceptional case be able to sustain a claim for damages for being kept out of its money where the fundamental complaint is one for breach of contract on the basis that a party who fails to perform its primary obligation comes under an immediate secondary obligation to pay damages. However such a claim would have to satisfy the requirement of Wadsworth v Lydall and in practice finance charges would be unlikely to be recovered as damages until the defaulting party knew of and had a reasonable opportunity of verifying the whole or part of the damages claimed, just as statutory interest is not ordinarily awarded until the default is clear. Clause 52(4)(b) and following of the contract conditions draw attention to the importance of doing so in respect of claims for additional payment under the contract conditions the estimated amounts of which are also to incorporated in the contractor's monthly statements under clause 60(1)(e). It may be assumed that a similar attitude would be taken towards a claim for breach of contract which was not a claim which could be made under a contract condition and even though under this contract it was not to be included in a monthly statement. Thus it may be doubted whether therefore there would in practice be much advantage in pursuing such a claim, particularly if the contract provided a mechanism which if duly implemented entitled the contractor to recover rolled over finance charges (as clause 60(6) does: see Hobhouse J in The Secretary of State for Transport v Birse-Farr Joint Venture (1993) 62 BLR 36 at page 59 - 60). Indeed the ability to recover interest on interest (if already applied for) is another reason why I conclude that clause 60(6) is to be regarded as the parties' intention as what was to happen if Schal should fail to certify in respect of a matter which (subject to my decision on Issue 12) was included or was to be included in a monthly statement eg under clause 60(1)(e) and thus the Employer should have been notified of the amount. That is a desirable objective. On the other hand where BRL's claim is not one which could have been the subject of a monthly statement it is obviously still entitled to seek an award of interest pursuant to statute.

The answer to issue 11 is that, subject to the answer to issue 12, clause 60(6) is an exclusive remedy for Schal's failure to certify. Issue 12: Is BRL's Claim for Financing Charges Restricted to the Difference Between Sums Applied for and Certified?

I have summarised issue 12 in this way since in so far as BRL's claim for financing charges is made for breach of either contract, apart from clause 60(6), it cannot in principle be restricted to financing charges upon the shortfall, if any, between the sums applied for and the sums certified as the difference between an amount applied for and certified is relevant only to a claim under clause 60(6).

BRL's case was that it was entitled to interest at the contractual rate for the period between when sums ought to have been certified and when they were certified pursuant to Clause 60(6). Whether there had been a failure was a question of fact. The observations of Hobhouse J in Secretary of State for Transport v. Birse-Farr (1993) 62 BLR 36 were not conclusive when at page 58 he said:

Mr Thomas submitted that the failure to pay which attracts interest was clear: it was a "failure by the Construction Manager to certify or the Employer to make payment in accordance with sub-clauses (2), (3) and (5) of... clause (60)". He argued that this provision presupposed that either the Construction Manager has under-certified the Contractor's application or the Employer has failed in whole or in part to pay the certified sum. The contractual regime was plain: the contractor submits an application under clause 60(1), setting out what is alleged due to him under headings (a) to (e); the Construction Manager certifies in accordance with these headings under clause 60(2); the Employer makes payment under clause 60(2). Thus Mr Thomas submitted that there cannot be a "failure" within the meaning of clause 60(6) unless the contractor has asked for some amount and the Construction Manager has failed to certify it. Conversely there can be no "failure" where no such amount is applied for at the time, but is included many years later in a Statement of Claim.

I do not consider that this issue is capable of the simple answer suggested by Mr Thomas, although undoubtedly that will be the answer given in the majority of cases. In this action the parties differ as to whether the contractual procedures for eliciting the details and the substantiation of claims have been followed either by BRL or by Schal. I have already indicated that Schal was obliged to make investigations during the course of the contract. Hobhouse J, rightly in my view, excepted situations in which there had been bad faith or improper motive. He also spoke of "failure" as not respecting and giving effect to the terms of the contract. In my judgment a finding of "failure to certify" is not necessarily limited to a misapplication or misunderstanding of the contract. To put another way the misapplication or misunderstanding must be placed in its context. The facts may therefore be important and determinative. If a person in the position of the Construction Manager were to recognise that a contractor was in principle entitled to payment under the contract then there might be failure for the purposes of clause 60(6) if no payment were certified because the contractor has not been asked to submit records or if the contractor was not told why the records submitted were insufficient (cf clause 52(4)(f)). Similarly if there had been such a failure to respect or to give effect to the contract as to constitute a breakdown of the primary contractual machinery it is hard to see why clause 60(6) should limit the contractor's recovery in circumstances where even if he had submitted an application no payment would have been certified.

In my judgment therefore the answers to Issue 12 are:

The Preliminary Issues shall be answered as follows:

What is the legal effect (if any) of the extensions of time granted by Schal on 2.10.96?