The construction of a luxury dog hotel cost the appellant more than they bargained for, and this serves as a reminder of the importance of complying with the Housing Grants, Construction and Regeneration Act 1996 (the Act) and the Scheme for Construction Contracts (Scotland) Regulations 1998 (the Scheme).
The case of Tierney v G F Bisset (Inverbervie) Ltd 2022] SAC (Civ) 3, 2021 WL 06750731 concerned the appeal of the Sheriff's decision to find that a payment notice had been validly served in terms of the Act. The contract provided for monthly applications for payment. Bisset did not adhere to monthly applications and instead had only issued three applications for payment over a 9-month period.
The appeal concerned Bisset's third application. Due to deficiencies in the payment provisions of the parties' contract with regard to payment notices, the relevant parts of the Scheme applied. This obliged Tierney to issue payment notices to Bisset on a regular basis, even where no application for payment had been made. At the time of Bisset's third application for payment, Tierney had failed to issue the required payment notice. Bisset's application for payment was therefore regarded as the payment notice for the purposes of the Scheme. Furthermore, Tierney also failed to respond to Bisset's application with a payment or pay less notice, therefore the sum contained in the application became the notified sum, for the purposes of the Act.
In the first instance the Sheriff found in favour of the contractor (Bisset) and held that it was due a sum in excess of £40,000.00.
Issues considered on appeal
Tierney submitted that the Sheriff had made an error in finding that Bisset's payment notice had been validly served. Tierney's position was that Bisset's payment notice:
- Did not comply with the provisions of s.110A(3) of the Act.
- Was not in substance, form and intent, a payment notice.
- Was not validly issued in accordance with the contract.
In order for a payment notice to be valid, it must contain details of the sum due and the basis upon which the sum was calculated. Tierney disputed that the payment notice contained a sufficient basis for calculating the sum due, as it did not differentiate between labour and material costs. However, the Court considered an itemised breakdown of the price charged for each line item, included with the notice, was sufficient to comply with s.110A(3) of the Act.
The second question was whether Bisset's notice was in substance form and intent, a payment notice. Tierney's position was that it was not, because it did not (1) state, that it was an application for payment; or (2) give Tierney reasonable notice that the payment period had been triggered. However, given that 1) Bisset's application for payment became the payment notice due to Tierney's failure to serve a payment notice; and 2) it stated that payment was due within 14 days, the Court considered that Bisset's notice complied with the requirements of the Act and had made its intention to apply for payment sufficiently clear.
The final question was whether the valuation was issued in conformance with the contract, because it was not made in accordance with the monthly valuation schedule. However, in this case, the parties' contract was not Act compliant as it did not oblige any party to issue a party notice in accordance with Section 110A (2) of the Act. This meant the relevant parts of the Scheme applied. Tierney failed to serve a payment notice in accordance with the Scheme, therefore Bisset's application was regarded for the purposes of the Scheme as its payment notice, which the Court held was validly served.
Conclusion
It is important to review the payment provisions of your contract, to ensure you are aware of and comply with notice requirements. You should also review your contract to check that it is Act compliant. Otherwise, you could end up with some 'ruff' justice.
