Construction


Construction contracts - contract terms - interim payments - statutory interpretation - withholding payments

Melville Dundas Ltd (in receivership) & ors v George Wimpey UK Ltd & ors: HL (Lords Hoffmann, Hope of Craighead, Walker of Gestingthorpe, Mance, Neuberger of Abbotsbury): 25 April 2007

The appellant (W) appealed against a decision ([2006] SC 310) that it was obliged to make an interim payment to the respondent (M) under the terms of a contract between them.



M had contracted with W for the construction of a housing development. The contract provided for monthly applications by M for interim payments, which were to be made by W within 14 days of the application. Pursuant to the contract, M had applied for an interim payment, and there was no dispute that it was entitled to be paid. W did not, however, make any payment.



M was put into administrative receivership. W determined its employment and argued that, pursuant to clause 27 of the contract, the interim payment was no longer payable.



The issues to be decided were whether the words 'any further payment' in clause 27 extended to an interim payment that the employer was already liable to pay under the terms of the contract before determination of the employment; and whether the effect of clause 27 was invalidated by the provisions of the Housing Grants, Construction and Regeneration Act 1996 and, in particular, whether W was entitled to withhold the interim payment notwithstanding that it had not served a notice of its intention to do so in accordance with section 111(1) of the Act.



Held (Lords Mance and Neuberger dissenting; Lord Walker dissenting on the issue of whether section 111(1) applied only during the currency of the employment), the words 'any further payment' in clause 27 extended to any sums payable by the employer, whether or not they were already due, and therefore included interim payments that the employer was already liable to pay under the contract before the determination of the employment.



There was no conflict between clause 27 and the statutory requirements as to the terms that the contract should contain. The only substantive requirement of sections 109 and 110(1) was that the contractor should be entitled to payment by instalments, and that there should be an adequate mechanism for determining what he was entitled to be paid and when. The parties were free to agree the amounts of interim payments and the circumstances in which they became due, and there was no reason why Parliament should have left the parties free to agree that, but insisted that nothing should be capable of discharging that liability.



Section 111(1) had to be construed in a way that was compatible with the operation of clause 27. It would have been impossible for W to have served a notice within the prescribed time because it had only become aware of M's insolvency, and the cessation of its obligation to pay, after the end of the prescribed period. It would be absurd to impute to Parliament an intention to nullify clauses like clause 27, not by express provision, but by the device of providing a notice requirement with which the employer could never comply. It was doubted that section 111(1) should be held to apply only during the currency of the employment under the contract. Rather, it was to be construed, as a matter of lex non cogit ad impossibilia, as not applying to a lawful ground for withholding payment in respect of which it was not possible for notice to have been given within the statutory time frame.



(Per Lord Walker) Section 111(1) applied only during the currency of the employment and did not apply to the situation where an employer wished to exercise the right to set-off under clause 27, having determined the contractor's employment under the contract.



(Per Lords Mance and Neuberger) To the extent that clause 27 permitted what was prohibited by section 111(1), namely W's withholding of the interim payment, it was ineffective. On the face of it, if a statute provided that payment could not be withheld after a specified date, a contractual provision permitting the withholding of that payment had to be ineffective. The aims of sections 110 and 111 were to provide a clear and simple system to ensure that the parties to a construction contract knew where they were with regard to payments and to ensure that they could be confident about their cash flow.



Appeal allowed.



Robert Akenhead QC, Sean Smith (instructed by MacRoberts) for the appellants; Robert Howie QC, Jonathan Lake (instructed by Maclay Murray & Spens) for the respondents.





Landlord & Tenant



Assured tenancies - interpretation - rent reviews - social landlords

Riverside Housing Association Ltd v White & anor: HL (Lords Hoffmann, Rodger of Earlsferry, Brown of Eaton-under-Heywood, Mance, Neuberger of Abbotsbury): 25 April 2007
The appellant housing association (R) appealed against a decision of the Court of Appeal ([2005] EWCA Civ 1385, [2006] HLR 15) that the tenancy agreement which it had entered into with the respondent tenants (W) required a rent review to take place on the first Monday of June each year.



R had granted W an assured tenancy. Clause 2(6) of the tenancy agreement provided that R 'may increase the rent by giving four weeks' notice in writing'. Clause 2(7) stipulated that the 'rent payable will be increased annually with effect from the first Monday of June each year'. For the first few years of the tenancy, the rent was increased with effect from the first Monday in June, 28 days' prior notice having been given.



However, on 12 February 2001, R wrote to W, giving notice that their rent would change from 2 April 2001. Subsequent notices of rent increases were served by R on 1 February 2002, 31 January 2003 and 11 February 2004. R began possession proceedings against W on the ground of rent arrears. In their defence, W asserted that the four notices served by R since February 2001 were ineffective because they had been served long after the rent variation date. The judge held that the notices were valid. However, his decision was reversed by the appeal court.



Held, there were three important features of this case that distinguished it from the type of rent review clause with which the courts had become familiar in the last quarter of the 20th century. First, it was not a rent review clause that had been entered into in the normal commercial context. R was a charity and a registered social landlord. Its tenants would be relatively poorly off individuals, no doubt normally with limited, if any, experience of interpreting legal documents. Second, the level of reviewed rent was unaffected by the date from which it took effect. Third, the drafting of the rent review provisions in this case was wholly different from that contained in any rent review clause that had, so far as the court was aware, come before the court.



The combined effect of the centrally relevant clauses in the agreement was as follows. R was entitled to increase the rent once a year on 28 days' notice, which notice could take effect any time on or after the first Monday in June. In that connection, clause 2(6) imposed one condition, namely that R had to give the tenant four weeks' notice before the reviewed rent became payable. Clause 2(7) imposed another condition, in that it provided that the reviewed rent could not become payable earlier than the first Monday in June. The contention that a late notice would not deprive R of the right to a rent review was also supported by the statement that the rent 'will be increased' in clause 2(7). The notion that the date on which a rent increase took effect did not have to be the first Monday in June was further reinforced by the fact that there was nothing in clause 2(6) to indicate that the four weeks' notice referred to had to expire by any particular date. In the circumstances, the four challenged notices were valid.



Appeal allowed.



Andrew Arden QC, Jonathan Seitler QC, Iain Colville (instructed by Bremners) for the appellant; Jan Luba QC, Michael Barnes QC, Adam Fullwood (instructed by Stephensons) for the respondents; Christopher Baker, Tom Leech (instructed by Devonshires) for the intervener.





Employment



Equal pay - sex discrimination - victimisation - proper approach to claims under section 4 of the Sex Discrimination Act 1975

St Helens Metropolitan Borough Council v J E Derbyshire & ors: HL (Lords Bingham of Cornhill, Hope of Craighead, Carswell, Neuberger of Abbotsbury, Baroness Hale of Richmond): 25 April 2007
The appellants (D), 39 women, appealed against a decision of the Court of Appeal ([2005] EWCA Civ 977, [2006] ICR 90) that the employment tribunal had been wrong to conclude that two letters sent to them by their respondent employer (S) represented victimisation under section 4 of the Sex Discrimination Act 1975.



D, together with some 470 other women, had brought equal pay claims against S. S had settled the claims of the 470 other claimants by paying an agreed lump sum which was shared between them. D proceeded with their claims. Roughly two months before the claims were due to be heard, D received two letters from S. D claimed that the letters represented victimisation under section 4.



The employment tribunal concluded, among other things, that one letter contained what in effect was a threat in that it 'spelt out a danger that [D] might deprive children of school dinners, and that they might cause redundancies among their colleagues'. The tribunal also found that the letter 'amounted to an attempt to induce the acquiescence of individuals despite the view of their union'. It went on to conclude that the letter was intimidating. The Court of Appeal reversed the tribunal's finding of victimisation.



Held, when deciding whether victimisation under section 4 had occurred, the court should focus on the word 'detriment'. The reasoning in Chief Constable of West Yorkshire v Khan [2001] UKHL 48, [2001] 1 WLR 1947, suggesting as it did that the question of whether a particular act could be said to amount to victimisation, had to be judged from the point of view of the alleged discriminator, was not entirely satisfactory, Coote v Granada Hospitality Ltd (C185/97) [1998] All ER (EC) 865 applied, Ministry of Defence v Jeremiah [1980] QB 87, and Shamoon v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 11, [2003] 2 All ER 26 considered, and Khan not applied.



That said, the 'honest and reasonable' test suggested in Khan would in practice be likely to yield precisely the same result as an approach focusing on the word 'detriment'. It was hard to imagine circumstances where an 'honest and reasonable' action by an employer, in the context or conduct of an employee's equal pay claim, could lead to 'detriment' on the part of the employee. In this case, whether the employment tribunal had approached the central question by reference to what had been said in Khan or on the slightly more appropriate basis of 'detriment', it had reached an eminently justifiable answer for unassailable reasons.



Appeal allowed.



John Hendy QC, Damian Brown (instructed by Thompsons) for the appellants; Christopher Jeans QC, Simon Gorton (instructed by the local authority solicitor) for the respondents; Tess Gill, Nadia Motrasghi (instructed by Solicitor for the Equal Opportunities Commission) for the interveners.





Sentencing



Confiscation orders - criminal lifestyle - tax evasion - effect of failure to follow statutory procedure - duty to give reasons

R v Joseph William Brack, R v Joseph James Brack: CA (Crim Div) (Lord Justice Tuckey, Mr Justice Bennett, Mr Justice Gross): 24 April 2007
The Crown appealed against a decision by a judge during confiscation proceedings not to make a confiscation order against either of the defendants (F and S) in proceedings under the Proceeds of Crime Act 2002, following their pleas of guilty to separate offences of concealing criminal property, contrary to section 327(1)(a) of the Act.



F and S were father and son, and were market traders. Police officers had executed a search warrant at a cash-and-carry warehouse operated by F, where S was also an employee. Approximately £100,000 in cash was discovered in a safe and an office drawer. F pleaded guilty to the offence on the basis that he had evaded the tax liability due from his legitimate business earnings and had put the money out of the reach of the Revenue. He was sentenced to nine months' imprisonment, suspended for two years on the basis that the stashed money was not from other criminal activity but the undisclosed profits of legitimate trading.



During a search of S's home address, approximately £9,000 in cash was discovered under a floorboard and S had £4,000 in his possession. S pleaded guilty on the basis that he had been given the money by F as a loan for his upcoming wedding and honeymoon. He asserted that he did not know the money was criminal property but suspected it was the proceeds of F's tax evasion. S was sentenced to a community punishment order comprising 200 hours unpaid work. The £117,000 was

seized and forfeited by the magistrates' court.



The Crown submitted that the judge in the confiscation proceedings had erred by failing to carry out the inquiry required by section 6 of the Act, since the case fell to be considered under section 6(4)(b), and that the statutory assumptions under section 10(1) were not applied. The Crown further submitted that the judge did not hear any evidence before declining to make a confiscation order.



Held, the judge's task at the confiscation proceedings prescribed by section 6(4)(a), as defined by section 75, was to consider if F and S had led criminal lifestyles and benefited from criminal property as per section 6(4)(b). If that were the case, the judge had to apply one of the statutory assumptions under section 10, unless the assumption was shown to be incorrect or the assumption would result in a serious injustice to either F or S under section 10(6).



However, it appeared that at the confiscation proceedings, following the parties' failure to agree terms of an order, the judge dismissed the Crown's application on the basis that the measures under the Act were to be deployed for hardened drug criminals that purchased expensive cars and yachts, rather than offenders such as F and S.



The judge had not positively dismissed the application on the basis that it was unjust, and although the court had sympathy with busy Crown Court judges and the need to frequently perform mental gymnastics from case to case, judges had to comply with the terms of a statute and set out their reasons for reaching a particular decision.



It was clear that F and S had had criminal lifestyles as they had been convicted of money laundering offences, but the judge had not specified either of the two reasons set out in section 10(6), and his judgment had been short in length. Although it was not always necessary to hear oral evidence during confiscation proceedings to reach a decision, some reference to the evidence on which that decision was reached had to be made. It was not sufficient for a judge to simply state that an application should not have been made. The court had the jurisdiction to consider the confiscation proceedings afresh under section 32(2)(a), but it was more appropriate for the matter to be remitted to the Crown Court under section 32(2)(b) to be considered afresh.



Appeal allowed.



D Watson for the Crown; A R Barraclough for the defendants.





Housing



Intentional homelessness - review officers - deficiencies in decisions - obligation to invite representations

Rowley v Rugby Borough Council: CA (Civ Div) (Lords Justice Pill, Wall, Maurice Kay): 25 April 2007
The appellant (R) appealed against a decision of a judge to uphold the determination of a reviewing officer that R and her partner (T) had been intentionally homeless.



R and T had been living in private-sector rented accommodation. They moved out and applied to the respondent local authority for housing, claiming that their former landlord wanted to sell the property and that they were now homeless. A housing officer contacted the landlord, who stated that he had mentioned the possibility to R and T of selling the house but had not done anything further, that he had not given R and T any notice to vacate, and that they had given him notice of their departure.



The housing officer sent a letter to R and T asking them to confirm, among other things, the landlord's version of events. R and T did so, and on that basis the housing officer refused their application for accommodation. He held that they were intentionally homeless as they had given up the tenancy of a property that was reasonable for them to occupy. R and T requested a review. The reviewing officer adopted the housing officer's reasons and upheld the decision. R and T's appeal was then dismissed.



R submitted that the reviewing officer had erred in law under regulation 8 of the Allocation of Housing and Homelessness (Review Procedures) Regulations 1999. R argued that the reviewing officer should have found there to be a deficiency in the housing officer's decision, as it had failed to explain how R and T's homelessness could be intentional when they felt under an obligation to leave the property, given their landlord's apparent desire to sell. In the light of such a deficiency, R contended, the reviewing officer had been obliged under regulation 8(2)(b) to invite R and T to make representations orally or in writing, or both orally and in writing.



Held, the reviewing officer had not erred in law. Any implication that R and T were obliged to leave, or that they had no alternative but to leave their rented accommodation, was superseded when they ratified the landlord's version of events as set out in the letter from the housing officer. By endorsing that letter, R and T were agreeing that the landlord had not given them notice to vacate, and that he had not informed them of any specific plans to sell the property. Therefore, by the time of the housing officer's decision, there was no factual dispute to resolve or explain. Accordingly, there was no deficiency in the decision to be considered by the reviewing officer and no requirement that he invite R and T to make representations pursuant to the regulations.



Appeal dismissed.



Stephen Cottle (instructed by Eric Bowes & Co) for the appellant; Catherine Rowlands (instructed by local authority solicitor) for the respondent.





Human Rights



Freedom of expression - legislation - licences - local government - peaceful enjoyment of possessions - proportionality

Belfast City Council v Miss Behavin' Ltd (Northern Ireland): HL (Lords Hoffmann, Rodger of Earlsferry, Mance, Neuberger of Abbotsbury, Baroness Hale of Richmond): 25 April 2007
The appellant local authority appealed against a decision to quash its refusal of an application by the respondent company (B) for a licence for a sex establishment in Belfast under the provisions of the Local Government (Miscellaneous Provisions) (Northern Ireland) Order 1985.



B had applied to the local authority for a licence to run a sex shop at premises in Belfast, but that application was refused under paragraph 12 of schedule 2 of the order, on the grounds that the appropriate number of sex shops in the relevant locality was nil. The Court of Appeal held that, in exercising its statutory powers, the local authority had not sufficiently taken into account B's right to freedom of expression under article 10 of the European Convention on Human Rights, and its right to peaceful enjoyment of its possessions under article 1 of protocol 1.



The local authority submitted that if the 1985 order complied with article 10, it was not open to a disappointed applicant such as B to raise an article 10 argument in relation to his own application.



Held, the approach of the appeal court was contrary to the reasoning in R (on the application of Begum) v Denbigh High School Governors [2006] UKHL 15, [2007] 1 AC 100, and also impractical. The court was concerned with whether B's human rights had been infringed, not with whether the local authority had properly taken them into account, and what was important was the practical outcome of the decision and not the quality of the decision-making process itself, Denbigh applied. In doing so, it was bound to accept that the local authority was much better placed than the court to decide whether the rights of sex shop owners to sell pornographic literature and images should be restricted.



There were situations in which the court was entitled to say that the legislation itself struck a fair balance between the rights of the individual and the interests of the community, so that there was no room for the courts to strike the balance in an individual case. However, this was not such a case. Where there was no indication that the balance had been struck by the local authority, the court had no alternative but to strike the balance itself, giving due weight to the judgments of those who were in much closer touch with the people and the places involved than the court could ever be, Kay v Lambeth LBC [2006] UKHL 10, [2006] 2 AC 465 distinguished.



On the facts, the local authority's refusal of a licence was not a violation of B's convention rights. Although article 10 and protocol 1 were engaged in this case, it was at a low level, and in the circumstances it was right to restrict both freedom of expression and enjoyment of possessions for the protection of the public interest.



Appeal allowed.



Richard Gordon QC (instructed by the local authority solicitor) for the appellants; John Larkin QC (instructed by Fox & Associates (Belfast)) for the respondents.