Everwarm Ltd v BN Rendering Ltd

Factual and Procedural Background

The Claimant, Company A, claims £798,468 against the Defendant, Company B, who counterclaims for £1,957,905 based on various causes of action related to 38 labour-only subcontracts for external wall insulation (EWI) works in Scotland. The underlying facts date back to December 2013, but the trial was fixed only in January 2019 after transfer to the Technology and Construction Court (TCC). The trial excluded certain issues reserved for later directions.

The parties operated largely informally, with many subcontracts concluded orally and poor contemporaneous documentation. Company B, initially a small enterprise recruiting labour from central and eastern Europe, undertook a substantial proportion of Company A's EWI works. Payment disputes arose primarily over measurement and valuation of works, including contested claims for additional work and retention monies.

Witness evidence was given by representatives of both parties and a quantity surveying firm engaged by Company A. Written evidence was accepted for some witnesses unable to attend. Following trial, further written submissions were exchanged, including on a recent Court of Appeal decision.

Legal Issues Presented

1. Did Company A's standard terms and conditions apply to all subcontracts, and if so, which revision applied to each subcontract?
2. Were any terms implied into the subcontracts?
3. Are Clause 4.9 and/or Clause 4 of Company A's terms void or unenforceable in respect of subcontracts incorporating them?
4. Was the so-called "Agreed Method" for measuring window and door reveals (ingoes) agreed between the parties?
5. What rate was agreed for each subcontract?
6. Did Company A carry out its assessment in accordance with the express and implied terms of each subcontract?
7. Is Company A entitled to £798,468 plus interest as a debt under Clause 4.9?
8. Is Company B entitled to sums claimed in its final accounts and retention monies plus VAT and interest?

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Wood v Capita Insurance Services Ltd [2017] UKSC 24	Principles of contract construction	Applied to interpret Clause 4.9 and its scope regarding assessments.
Braganza v BP Shipping Ltd [2015] UKSC 17	Implied term controlling the exercise of contractual discretion	Implied term that Clause 4.9 discretion must not be exercised arbitrarily or irrationally.
Mid Essex Hospital Services NHS Trust v Compass Group UK [2013] EWCA Civ 200	Implied term restricting arbitrary exercise of discretion	Supported the implication of a term restricting arbitrary or capricious exercise of Clause 4.9 discretion.
S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2446	Incorporation by reference in payment notices and statutory compliance	Considered in assessing sufficiency of BN's payment notices and incorporation of documents by reference.
Adam Architecture Ltd v Halsbury Homes Ltd [2017] EWCA Civ 1735	Distinction between contract requirements and statutory provisions under HGCRA	Guided the court's analysis of compliance with HGCRA payment notice requirements.
Bennett (Construction) Ltd v CIMC MBS Ltd [2019] EWCA Civ 1515	Compliance with HGCRA and adequacy of payment mechanisms	Used to determine that partial incorporation of payment provisions is permissible and Scheme provisions supplement contracts.
Balfour Beatty Construction Northern Ltd v Modus Corovest (Blackpool) Ltd [2008] EWHC 3029	Interpretation of payment notice regimes pre-HGCRA amendments	Distinguished from Clause 4.9 context; did not undermine interim payment provisions.
M Davenport Builders Ltd v Greer [2019] BLR 241	Definition and treatment of "smash and grab" payment claims	Referenced for characterization of BN's claim for payment on failure to respond to notices.

Court's Reasoning and Analysis

The court began by determining the nature of the subcontracts. The first subcontract (RANDCHA) was concluded both orally and in writing and incorporated Company A’s 2013 five-page terms and conditions. Subsequent subcontracts prior to 21 December 2015 were oral and not subject to these written terms. After that date, most subcontracts were written and subject to either Rev 7 or Rev 8 terms, though there was no consistent application of these revisions.

The court rejected the existence of an "Agreed Method" for measuring ingoes (window and door reveals) as claimed by Company B, finding no oral agreement to that effect. Instead, the standard measurement method applied, with additional work for insulation in ingoes treated separately and payable on a reasonable sum basis if not agreed.

Clause 4.9, central to Company A’s claim, allows for discretionary assessment of payments and recovery of overpayments. The court held that Clause 4.9 applies only to written subcontracts (Rev 7 or Rev 8) and not to RANDCHA or oral subcontracts. It found an implied term that any assessment under Clause 4.9 must not be arbitrary, capricious, or irrational.

The assessments carried out by the quantity surveyors (T&T) on behalf of Company A were found deficient and arbitrary. They used an inappropriate blanket percentage reduction based on limited sampling and failed to consider variations or retention properly. As a result, the court concluded that Company A did not perform the assessments in accordance with the contractual terms and dismissed its claims under Clause 4.9.

The court analysed compliance with the Housing Grants, Construction and Regeneration Act 1996 (HGCRA), concluding that Clause 4.9 lacks certain notice provisions required by the Act but that these deficiencies are remedied by importing the statutory Scheme provisions, including the requirement for payment notices and final payment dates. Clause 4.9 was not found unenforceable under the HGCRA or the Unfair Contract Terms Act 1977.

Company B’s counterclaims for payment of final accounts and retention monies were examined. The court found that Company B’s final account notices lacked sufficient detail to comply with contractual and statutory notice requirements, and thus no notified sum arose under s.111 HGCRA. Consequently, Company B’s claims for final account payments failed.

Regarding retention, the court found that Company B was substantively entitled to release of retention sums (totaling £406,015.90 plus VAT), with retention held at 2.5% for 12 months post-completion. Even where works were suspended and not completed, the parties’ mutual agreement meant retention was due 12 months after suspension was effectively accepted. Company A admitted these sums were due but sought to set off alleged overpayments. The court rejected this set-off defence due to its late and unpleaded nature and lack of evidential foundation.

Holding and Implications

The court dismissed Company A’s claim based solely on Clause 4.9 of the written subcontracts due to failure to comply with express and implied terms governing assessments.

Company B succeeded on its counterclaim for release of retention monies totaling £406,015.90 plus VAT, with judgment entered accordingly.

The court held that Clause 4.9 is not void or unenforceable under the HGCRA or Unfair Contract Terms Act but requires supplementation by statutory notice provisions. The informal nature of the parties’ dealings and poor record-keeping contributed to the dispute and undermined Company A’s assessment claims.

Company B’s claims for final account payments failed due to inadequate notices and lack of notified sums under the HGCRA. The court declined to allow Company A to rely on a belated set-off defence. The judgment establishes the importance of clear contractual terms, compliance with statutory notice regimes, and the limits on unilateral assessments in construction contracts.

No broader precedent was set beyond the application of established principles to the specific facts of these subcontracts.