Summary
The case revolves around the contractual relations between the pursuer (plaintiff) and the defender, particularly after JAD Joinery Ltd, the original contractor, faced financial difficulties and was liquidated in June 2021. A new contract was formed between the pursuer and the defender, with the pursuer taking over JAD Joinery Ltd’s work on the same terms. The defender paid the pursuer for the work performed, without challenging the substitution of JAD Homes Ltd for JAD Joinery Ltd until after the work was completed. The court accepted the pursuer’s evidence that the new contract started on 7 June 2021, based on commercial sense and the mutual trust between the parties. Despite some documentary errors during the transition, the defender continued making payments without dispute. The defender’s claim that no new contract existed until July 2021 was rejected as it lacked commercial logic. The court ruled in favour of the pursuer, finding that a valid contract existed from 7 June 2021. The defender’s argument regarding the liquidator’s actions was deemed irrelevant, as the liquidators were not part of the case. The court determined that the pursuer was entitled to payment for the sums claimed, as well as expenses.
JAD Homes Ltd, JAD Joinery Ltd, MNM Developments (Scotland) Ltd and Evantyr Properties Ltd were controlled by John A. Dickson and Marc Teague, respectively.
Both JAD Joinery and MNM were involved in the construction industry, relying on verbal agreements due to a strong history of trust.
The Court found as follows.
In November 2020, JAD Joinery provided joinery services to the defender for £947,578.58. Work commenced in April 2021, and initial invoices were paid to Joinery without issue.
By May 2021, due to third party issues JAD Joinery faced significant financial issues, threatening insolvency.
John Dickson proposed to MNM that JAD Homes Ltd (the pursuer) take over JAD Joinery’s obligations to avoid project disruption.
In May 2021, the parties verbally agreed that JAD Homes Ltd would complete the work, starting (immediately) on June 7, 2021, under similar terms as the first contract but with adjusted pricing. The owners also agreed that JAD Joinery would cease work on June 4, 2021, and JAD Homes Ltd continued on with the project works without interruption.
Invoices submitted by JAD Homes Ltd between June 2021 and June 2022 were paid by the defender.
A clerical error led to a duplicate payment of £24,774.24 to JAD Joinery’s liquidators, who refused to return the amount, retaining it against ‘a claim’. MNM deducted this sum from the final payment owed to JAD Homes Ltd.
Upon project completion, the defender withheld the duplicate payment from the final balance, leaving an outstanding amount which became the subject of legal action.
This dispute centres on the defender’s decision to withhold £24,774.24 from the final payment due to JAD Homes Ltd, citing a duplicate payment made in error to JAD Joinery Ltd’s liquidators. Although both parties acknowledged the duplicate payment, no steps were taken to recover the funds from the liquidators. The pursuer issued an application for payment/ claim for payment claims, after a minor adjustment, as outlined in a final account. The defender failed to issue a Pay Less Notice or respond timely to the pursuer’s payment notices under the Housing Grants, Construction and Regeneration Act 1996, which added further complexity to this building and construction dispute.