KNW Ltd - Quality in the Work Environment - Essay Example

REPORT TO ALLAN SMITH (D & A Builders) Review of relevant facts for consideration: Mr. Allan Smith of D & A Builders has submitted an “interim” bill to KNW Ltd. as represented by its Director, Mr. Dan Maxwell of £218,000 representing the contract price for the construction housing units for KNW Ltd. and further detailed below Completion of one (1) unit 3-bedroom detached housing at £95,000 Partial payment for (1) unit 3-bedroom detached housing Mr. Dan Maxwell is withholding payment “because the houses were not finished on time. ”. Mr. Maxwell may also include the following in his defense: 1. The transaction was not valid because Mr. Allan Smith failed to send through the post a confirmation letter accepting the order as instructed and formally advised in a letter sent before engagement began. 2. Reference to the July 29 incident, and its notice of termination and immediate withdrawal by D & A . 3. The interim amount of £218,000 is an overstatement since he has approved a contract price of £ 95,000 per unit. Mr. Smith is preparing to sue jointly KNW Ltd, and Mr. Dan Maxwell for collection of the outstanding account and the balance as per “agreed contract sum.” Attached is a summary and review of events for Mr. Allan Smith’s reference. Report to Mr. Allan Smith Mr. Allan Smith’s engagement with Mr. Dan Maxwell and the attendant dispute on withheld payment fall within the purview of the legal statute “Housing Grants, Construction, and Regeneration Act 1996, c.53” particularly “Title II: Construction Contracts” as indicated in the following: 1. Section 104 - Construction Contracts defines construction contract as “ an agreement with a person for any of the following – (a) the carrying out of construction operations… (subsection 1-a);” 2. Section 105 – Meaning of “Construction Operations” defines construction operations as “operations of any of the following descriptions – (a) construction, alteration, repair, maintenance, extension, demolition, or dismantling of buildings, or structures forming, or to form part, part of the land (whether permanent or not) (subsection 1-a).” In the case RJT Consulting Engineers Ltd. V DM Engineering (Northern Ireland) Ltd, Lord Justice Ward has outlined the significant reforms added to the Construction Contract : It Introduced stage or periodic payments in Sect. 109 – Entitlement To Stage Payments which states “ a party to a construction contract is entitled to payment by installments, stage payment or other periodic payment for any work under the contract…” thereby ensuring the inclusion of payment terms in the construction contract. Tackled the issue of providing due notice of intent to withhold payments in Sect. 111 – Notice of Intention to Withhold Payment to discourage any intent to short-change the other party. The specific provision state “ a party to a construction contract may not withhold payment after the final date for payment of a sum due under the contract unless he has given an effective notice of intention to withhold payment” continuing “to be effective, such a notice must specify – the amount proposed to be withheld and the ground for withholding payments, or if there is more than one ground, each ground and the amount attributable to it.” (Subsect. 1, 2-a,b),. Emphasized the right to refer disputes for adjudication under Sect. 108 – Right to Refer Disputes to Adjudication, to empower the parties to avail of provisional but executable disposition of disputes. Prior to Mr. Smith’s referral of his complaint for adjudication pursuant to the Section 108 he may serve via post on Mr. Dan Maxwell final notice for collection and his plan to refer the dispute to an adjudicator if payment is not received within 7 days from receipt of letter. Mr. Smith’s complaint to filed will center on the violation by KNW Ltd of the provisions of Section 111- Notice of Intention to Withhold Payment and the prayer for the collection of outstanding account of KNW Ltd amounting to £ 218,000 as stated in the interim account, the balance of the contract price due and recovery of cost of money, litigation expenses, or damages. Mr. Smith will seek exception to KNW Ltd. statement that the “houses were not finished on time” and forward proposition that the incident on July 28 may have delayed the project after Mr. Maxwell issued a notice to D & A of termination and immediate withdrawal from the construction site. Whereas in a settled case, RJ Knapman Limited v. Richards and Others, the facts included specific dates from start to completion, and clear statement of sanctions in case of non completion i.e. issuance by developer of certificate of non-completion and corresponding monetary penalty, these information were absent with D & A Builders and KNW Ltd. Moreover, the starting date may be subjected scrutiny as Mr. Smith did not formally accept the order but began deployment to begin construction. Furthermore, the basic contract provisions highlighted by Lord Justice Ward in RJT Consulting Engineers Ltd. V DM Engineering (Northern Ireland) Ltd, are not implied in the communications between the two parties. Other legal precedents are: In Melville Dundas Limited (In Receivership) And Others (Respondents) V George Wimpey Uk Limited And Others (Appellants) (Scotland) failure to settle initial payment despite insolvency does not extinguish the obligation. Reinwood Limited v L Brown & Sons Limited explains that the issuance of the notice will provide basis for the payee referral for adjudication will be availed. The occurrence of an incident, such as that on July 28 has a parallel in the case City Inn Limited V Shepherd Construction Limited , where “general rule is that the main contractor is bound to complete the work by the date for completion stated in the contract. If he fails to do so, he will be liable for liquidated damages to the employer” unless by “his acts or omission, he has prevented the main contractor for completing his work by completion date.” Mr. Smith, must likewise prepare for probable counter-arguments of Mr. Maxwell which are : The agreement was technically invalid after Mr. Allan Smith failed to send via post a confirmation letter accepting the order ; The interim amount of £ 218,000 is an overstatement vis-à-vis approved contract price of £ 95,000 per unit. In the case Melville Dundas Limited (In Receivership) And Others (Respondents) V George Wimpey Uk Limited And Others (Appellants) (Scotland), Sir Michael Lathan’s Report Constructing the Team, confirmed the widely held suspicion that the present arrangements discouraged co-operation and teamwork. It further listed the principles that a construction team should include to be effective, foremost of which was “clearly setting out the period within which interim payments must be made to all participants in the process, failing which they will have an automatic right to compensation, involving payment of interest at a sufficiently heavy rate to deter slow payment.” Moreoever, the provisions of Section 107 – Provisions Applicable Only To Agreements In Writing rules that an “(4) An agreement is evidenced in writing if an agreement made otherwise than in writing is recorded by one of the parties…” With regard whether Mr. Dan Maxwell acknowledged Mr. Smith’s proposal for varied contract price since at the start, there no indication of approval or objection was established, Mr. Smith should justify the increase by providing prices, valuations, material costs. The case of SWI LTD V P & I Data Services Ltd concerned the issue of fixed or unit price, whereupon, terms such as “measurement,” “valuation,” and “unit rates” are essential to determine the type of pricing used. References and Cases Cited: 1. Housing Grants, Construction And Regeneration Act 1996 C. 53, Part II Construction Contracts 2. RJT CONSULTING ENGINEERS LTD. V DM ENGINEERING (NORTHERN IRELAND) LTD., Case No: A1/2001/1235, Court of Appeal (Civil Division), 8 March 2002 3. R J KNAPMAN LIMITED V RICHARDS AND OTHERS Case No: HT-06-264 High Court of Justice Queen's Bench Division Technology and Construction Court 12 October 2006 4. MELVILLE DUNDAS LIMITED (IN RECEIVERSHIP) AND OTHERS (RESPONDENTS) V GEORGE WIMPEY UK LIMITED AND OTHERS (APPELLANTS) (SCOTLAND) House of Lords 25 April 2007 5. REINWOOD LIMITED V L BROWN & SONS LIMITED House of Lords 20 February 2008 6. CITY INN LIMITED V SHEPHERD CONSTRUCTION LIMITED CA101/00 Outer House, Court of Session 30 November 2007 7. SWI LTD V P & I DATA SERVICES LTD Case No: B2/2006/2506 Court of Appeal (Civil Division) 4 July 2007 Sequence of Events (from perspective of Mr. Allan Smith) 1.0 D & A Builders entered into an arrangement with Mr. Dan Maxwell, Director of property developer KNW Ltd., for the construction of 3 bedroom semi-detached houses with a contract price of L 95,000 per unit. KNW Ltd, gave D & A one (1) month from period July 4 to August 4 to complete the unis. 2.0 The details of the arrangement were as follows: 2.1 KNW Ltd. initiated the arrangement through an informal discussion with Mr. Smith during a dinner at the Country Club. 2.2 After evaluating the plans, Mr. Smith formally expressed its intent through a communication using D&A standard form (letterhead-style form and pale grey colored reverse) including a price variation clause. 2.3 KNW Ltd. accepted the offer in a formal letter, issued the order together with price confirmation and project timetable In addition to regular terms of business, the correspondence highlighted the urgency of the project, but failed to comment on the price variation proposal. KNW Ltd. directed D&A to reply through post of its acceptance otherwise the order was invalid. 3.0 D&A deployed and began the project thereafter. 4.0 The on site-incident on July 28 greatly affected the relationship KNW Ltd wrote D&A to immediate terminate the project and vacate the premises. 5.0 Despite receipt of the notice on July 30, D&A continued the project as it was midway through completion of the second unit to attain its target completion date of August 4. 6.0 On August 4, D & A sent KNW Ltd an “interim” account of L218,000 representing the cost for the 2 units given that the second unit was almost completed. 7.0 KNW Ltd. rejected the statement citing as reason that “the houses were not finished on time.” 8.0 Mr. Allan Smith considered initiating legal action jointly upon Mr. Dan Maxwell and KNW Ltd. for collection of the L218,000 and balance of the contract price for the second unit. Read More