Hegarty, P. J. & Sons Ltd v Royal Liver Friendly Society

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 11 October 1985
• Neutral Citation: 1985 WJSC-HC 2664
• Court: High Court
• Docket Number: 539/1985,[1985 No. 639SS]
• Date: 11 October 1985

1985 WJSC-HC 2664

THE HIGH COURT

539/1985

P J HEGARTY & SONS LTD v. ROYAL LIVER FRIENDLY SOCIETY

BETWEEN

P. J. HEGARTY & SONS LIMITED

PLAINTIFFS

AND

ROYAL LIVER FRIENDLY SOCIETY

DEFENDANTS

1 Judgment of Mr. Justice Murphy delivered the 11th day of October 1985.

2 This is a claim by P. J. Hegarty & Sons Limited (the builders) against Royal Liver Friendly Society (the employer) by way of summary summons claiming a sum of £101,799.23. The claim arises out of two agreements in writing one dated the 14th day of March 1979 and the other the 7th day of December 1979 and each made between the employer of the one part and the builders of the other part.

3 Of the total amount claimed, £82,480 is payable on foot of interim certificates issued by the architects appointed for the purposes of those contracts and the sum of £2,539 represents moneys certified on foot of a final certificate issued by the same architects. The balance of the claim amounting to £16,780.23 represents interest claimed in accordance with the provisions of the said contracts.

4 The employer admits that the sums claimed were duly certified for payment as aforesaid but claims to be entitled to a set off against the "builders" claim aforesaid sums not quantified but stated to exceed a sum of £600,000 due by the builders to the employer as a result of the negligence and delay of the builders in carrying out the works provided for in the contracts.

5 The employer's claim for damages for negligence and delay is not of recent origin and certainly was not devised as a belated defence to the builders" liquidated claim herein. Whilst the present proceedings were initiated by way of summary summons issued on the 30th of April 1985 the employer's claim for damages had been commenced a number of years earlier. It appears from the documents put in evidence that the Statement of Claim in the employer's action was delivered on the 29th of July 1982.

6 Reference was made to three decided cases with regard to the right to counterclaim or set off of other claims against moneys due on foot of a certificate (in particular an interim certificate) issued in favour of a contractor (or sub-contractor) under a building contract (or building sub-contract as the case may be). These cases were as follows:-

7 1. Dawnays Limited and F. G. Minter Ltd.1971 1 W.L.R. 1205.

8 2. Modern Engineering and Gilbert-Ash 1974 A.C. 689.

9 3. John Sisk & Son Ltd. and Lawter Products B.V. (an unreported decision of the then President of the High Court, Mr. Justice Finlay delivered on the 15th November 1976).

10 The Dawnays case is interesting partly for the fact that it lays down an entirely novel legal proposition and partly because this proposition was enunciated by Lord Denning M.R. in the style and with the confidence which is now universally recognised.

11 Having pointed out the difficulties which might arise if a counterclaim was to be permitted Lord Denning went on (at page 1209) to express his views in the following terms:-

"Every businessman knows the reason why interim certificates are issued and why they have to be honoured. It is so that the sub-contractor can have the money in hand to get on with his work and the further work he has to do. Take this very case. The sub-contractor has had to expend his money on steel work and labour. He is out of pocket. He probably has an overdraft at the bank. He cannot go on unless he is paid for what he does as he does it. An interim certificate is to be regarded virtually as cash, like a bill of exchange. It must be honoured. Payment must not be withheld on account of cross-claims, whether good or bad - except so far as the contract specifically provides. Otherwise any main contractor could always get out of payment by making all sorts of unfounded cross-claims."

12 Whilst the passage cited may contain good commercial sense and indeed represent an attractive example of the staccato prosestyle of the distinguished former Master of the Rolls it would seem to suggest that an important legal inference should be drawn from the needs of the parties rather than their deeds. In any event the passage quoted was unanimously rejected in all of the speeches in the House of Lords in the Gilbert-Ash case and, more importantly, by the President of the High Court in the Sisk case. Lord Diplock, while recognising that case flow was a matter of importance to building contractors pointed out that it was likewise of importance in a range of industries or occupations ranging from shipbuilding to shopkeeping and was, perhaps, critical of the emphasis placed by Lord Denning on that consideration when he stated (at page 718) as follows:-

"It is not to be supposed that so elementary an economic proposition as the need for cash flow in business enterprises escaped the attention of judges throughout the 130 years which had elapsed between Mondel v. Steel and Dawnays' case in 1971, or of the legislature itself when it passed the Sale of Goods Act in 1893."

13 A not dissimilar criticism appears in the speech of Lord Salmon at page 724 as follows:-

"My Lords, I cannot help thinking that building contractors and sub-contractors and architects advising building owners know far more about the building trade than I or, indeed any judges can hope to do. I am not prepared to approach any contract on the pre-supposition that the parties must have meant to exclude or curtail the right of set off. I am content to consider the language of each contract and see whether it has done so."

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