A sub-contract between the defendant contractor and the claimant sub-contractor provided for the assessment and agreement of the final account for the sub-contract works in terms which were loosely based on standard forms of sub-contract. The contractor was to assess the final account on receipt of the sub-contractor’s final account submission, or, in the absence of such a submission, make its own valuation of the final account, and then to notify the sub-contractor of the proper amount due for payment. If the sub-contractor did not dissent from such notification within 14 days, the notified figure was to be deemed to be agreed and would be binding. After the works were completed, the contractor sent the sub-contractor a document which set out a final account assessment broken down into a number of different headings with an overall figure at the bottom, with two columns setting out the figures put forward by the contractor and the sub-contractor respectively. A subsequent adjudication commenced by the sub-contractor in respect of the second phase of the works resulted in an award in its favour. In a second adjudication commenced by the contractor, the same adjudicator concluded that the sub-contractor was not bound by the contractor’s final assessment in so far as he had already awarded a different and higher sum for the second phase, but that it was bound by the remainder of the final assessment. The claimant brought proceedings challenging the adjudicator’s decision and seeking declarations in its favour. Issues arose as to whether the final assessment document was a valid notification, pursuant to the sub-contract, of the amount due for payment and whether the sub-contractor had validly dissented from it.
On the claim—
Held, claim allowed. (1) If a contract required one party to notify the other that a sum was due, under a clause that provided for a deemed agreement that bound the parties unequivocally, then it was a prerequisite of the arrangement that the sum due and the clause were clearly set out in the relevant notice. It was not sufficient that the recipient could have worked it out for itself, particularly if the alleged calculation required reliance on later documents, some of which were not even in the recipient's possession. Further, if a notice under a certain clause had a draconian effect pursuant to the contract, such as where the sum notified would be binding if not dissented from within a specified time limit, the notice should make clear that it had been issued under that clause. In the present case, the sub-contract distinguished between the gross valuation of the works and the sum due and payable and the requirements in respect of the latter were similar to the need to identify the amount due for payment by way of an interim assessment. What had to be notified was the proper amount due, not the overall valuation of the sub-contract works. A two-stage exercise was required, consisting of the assessment or valuation of the total amount payable for all the sub-contract work, less previous payments and any ongoing retention. The document provided by the contractor did not meet those requirements because it did not purport to be the notification of an amount due but was instead described as a final account assessment, it contained only a purported valuation of the works carried out and did not identify a particular sum which was said to be due and payable, and it did not refer to the relevant clause of the sub-contract. In those circumstances, a reasonable recipient of the document would not have regarded the documents as a notification of the sum due (paras 20, 22, 23, 25, 27, 28, 29, 32, 33, 35).
Ben Sareen (instructed by Hugh James, Cardiff) for the claimant.
Lynne McCafferty (instructed by Fenwick Elliott llp) for the defendant.