John Sisk & Son Ltd v Carmel Building Services Ltd (In

Administration)
Queen's Bench Division (Technology & Construction Court)
15 April 2016
Case Analysis
Where Reported
[2016] EWHC 806 (TCC); [2016] B.L.R. 283; [2016] C.I.L.L.
3821; Official Transcript;
Case Digest
Subject: Arbitration Other related subjects: Construction
law
Keywords: Arbitration awards; Burden of proof;
Construction disputes; Interest; Interim payments; JCT
contracts; Late payments; Set-off; Standard Building Sub-
Contract Conditions
Summary: In an appeal against an award made in
arbitration proceedings, the court upheld the arbitrator's
finding that cl.4.10.5 of the JCT Standard Building Sub-
Contract Conditions only applied to interest on interim
payments due from the contractor to the sub-contractor and
was not wide enough to cover sums due to the latter by way
of final payment.
Abstract: A contractor appealed under the Arbitration Act
1996 s.69 against an arbitration award made in favour of the
respondent sub-contractor.

The contractor had sub-contracted services to the respondent

under a sub-contract which incorporated the JCT Standard
Building Sub-Contract Conditions 2005 (Revision 1 2007).
The contractor valued the sub-contractor's work at
approximately 2.6 million for the purposes of an interim
payment. Three weeks later the sub-contractor entered
administration and the contractor therefore terminated the
sub-contract. Several years later, after the works had been
completed, the sub-contractor made a claim for 1.9 million
under cl.7.7.4 of the JCT conditions. That clause stated that
upon completion of the works the sub-contractor could apply
to the contractor for the value of work executed but not paid
for. It also provided that the contractor could deduct from
that sum any loss or damage caused as a result of
termination of the contract. The instant contractor claimed a
set-off, and both parties claimed late payment interest.
Clause 15.9 of the sub-contract and cl.4.10.5 of the JCT
conditions both provided for the contractor to pay interest on
sums due by way of interim payment. The dispute was
referred to arbitration. The contractor asserted that its earlier
valuation of the works had been a gross overstatement. The
arbitrator concluded that the contractor had failed to show
why its earlier valuation was erroneous, and he also rejected
the contractor's claim to set-off. He concluded that cl.15.9 of
the sub-contract was not a substantial remedy and was
therefore void by virtue of the Late Payment of Commercial
Debts (Interest) Act 1998 s.8(4), so that the 1998 Act
applied in default.
The contractor contended that the arbitrator had erred
(1) in relation to the burden of proof relating to the sub-
contractor's claim under cl.7.7.4;
(2) in relation to its primary claim to set-off under cl.7.7.4
by concluding that the claim was global and thus
irrecoverable;
(3) in holding that the 1998 Act was to be implied instead of
concluding that interest was payable at the rate defined in
cl.4.10.5.
Held: Appeal dismissed.
(1) The arbitrator had not erred in law in his approach to the
burden of proof. In relation to the value of the sub-
contractor's work at termination, he had first correctly
identified that the legal burden of proof fell on the sub-
contractor to prove the value of work done but not paid for,
and had then merely stated that the contractor had an
evidential burden to overcome in view of the contents of the
agreed valuation. The contractor's valuation figures advanced
by way of defence were significantly below those agreed only
three weeks before termination in a neutral pre-dispute
context. Moreover, the arbitrator had been entitled to take
the agreed valuation as the best available starting point for
evidence of the value of the sub-contractor's work at
termination (see paras 40-45 of judgment).
(2) The arbitrator had correctly stated that a party
endeavouring to prove a global or total costs claim would
carry a greater burden than a party endeavouring to prove
the same claim on an itemised basis. In doing so, he had
not introduced some flawed legal principle or
treated global and total costs claims as separate concepts,
but had merely reflected the comments of Akenhead J
in Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 (TCC),
[2012] B.L.R. 503. He had found as a matter of fact, on the
basis of all the evidence, that the contractor had failed to
prove its primary claim, Walter Lilly applied (paras 55-58).
(3) Clause 4.10.5 only applied to interest on interim
payments due from the contractor to the sub-contractor and
was not wide enough to cover sums due to the sub-
contractor by way of final payment under cl.7.7.4. That
conclusion was reinforced by the heading of cl.4.10, namely
"Interim Payments - amounts due". Thus, cl.4.10.5 was also
inapplicable and the provisions of the 1998 Act were to be
implied, as found by the arbitrator. Whether or not a remedy
was a substantial remedy for the purpose of the 1998 Act
involved a consideration of all the relevant circumstances at
the time when the relevant terms were agreed, so as to allow
an assessment of whether it would be fair or reasonable to
oust the right to statutory interest that would otherwise
apply. There was insufficient material on which to make such
an assessment in the instant case (paras 72, 76, 79).

Judge: Carr J
Counsel: For the appellant: Adrian Williamson QC. For the
respondent: Lord Marks QC.
Solicitor: For the appellant: Weightmans LLP. For the
respondent: CJ Hough & Co Ltd.