"Contractual Freedom versus Statutory Protection: Melville Dundas Ltd (in receivership) v George Wimpey UK Ltd in the House of Lords". Article by John MacGregor, Axiom Advocates published 2007 SLT (News) 165.

2 August 2007

John MacGregor, Axiom Advocates has had the above article published in the Scots Law Times. The article addresses the implications for the construction industry of the recent decision of the House of Lords in Melville Dundas Ltd (in receivership) v George Wimpey UK Limited 2007 SLT 413.

John MacGregor argues that the decision has provided employers with an incentive to withhold payments under a construction contract if a contractor is in financial difficulties, or may in the near future face financial difficulties, which cuts across the intention of the Housing Grants, Construction and Regeneration Act 1996.

The case was the first time the House of Lords had considered the protective payment provisions of the Housing Grants, Construction and Regeneration Act 1996 (the "1996 Act"). Melville Dundas had applied for an interim payment under a construction contract and no notice of withholding had been issued by George Wimpey UK Ltd. Melville Dundas subsequently went into receivership and the contract was determined. George Wimpey UK Ltd argued that the provisions of the contract entitled them to refuse to make any further payments to Melville Dundas. Melville Dundas argued that George Wimpey UK Ltd was not entitled to withhold payment of the interim payment because no valid withholding notice had been served before the final date for payment, which is required by the 1996 Act.

The House of Lords decided that the contractual intention of the parties took precedence over the literal wording of the 1996 Act. The article reviews the majority opinions of Lords Hoffmann and Hope and concludes that while the result reached by Lord Hoffmann may be a workable compromise for the construction industry, employers are left in a strong position. A contractor is entitled to protective payments only when he is trading without difficulties. The case provides employers with an incentive to withhold payment if a contractor is facing, or may in the near future face, financial difficulties. The case will therefore have serious implications for both contractors and employers in the construction industry.

Sean Smith, Axiom Advocates acted for the Appellants and Jonathan Lake, Axiom Advocates acted for the Respondents.

http://www.publications.parliament.uk/pa/ld200607/ldjudgmt/jd070425/melville-1.htm