Potential heads of claim - Building Contract Claims - page 128

generally. It has been held that a contractor may be entitled to interest or
financing charges if he pleads and proves them as special damage 376 .
An interesting application of the principle of Wadsworth v. Lydall is to be
found in the decision of the High Court of Justice in Northern Ireland in
Department of the Environment for Northern Ireland v. Farrans (Construction)
Ltd 377 , which arose under the JCT Form (1963 edition) and adds to the
debate in the construction industry about the recovery of interest or finan-
cing charges in building contract cases. Under clause 22, JCT 63 (clause
24.2.1, JCT 98), once the architect has issued his certificate of delay the
employer is entitled to deduct liquidated and ascertained damages at the
prescribed rate from moneys due or to become due to the contractor. If,
subsequently, the architect grants an extension of time so that a refund is
due to the contractor, is the contractor entitled in law to make any claim
against the employer for interest upon, or financing charges which are
attributable to, the moneys refunded?
This was the point at issue in the Ulster decision, but it should be noted
that Murray J was not asked to decide the question whether, under JCT 63,
the architect can issue more than one certificate under clause 22. For the
purposes of the case, the parties agreed that he could.
Murray J decided, on the facts before him, that where several certificates
were issued, with the result that sums previously deducted as liquidated
damages fell to be repaid, the contractor was entitled to interest thereon. He
held that clause 22 was to be construed as meaning that when the employer
received the first or any subsequent certificate it was open to him to start
deducting liquidated damages. The employer did this at his own risk in the
sense that if a later certificate was issued, which had the effect of vitiating
the earlier certificate, the employer was without protection against a claim
for breach of contract in failing to pay on the due dates the amounts shown
in the relevant interim certificates. In those circumstances the contractor was
entitled to the remedy appropriate for a common law claim for breach of
contract. His lordship applied Wadsworth v. Lydall and held that the arbitra-
tor had power to award damages, which could include interest incurred or
lost as a foreseeable consequence of the employer's breach of contract.
However, the wording of the clause makes it plain that the employer is
not making good an earlier breach of contract. Clause 24.2.1 of JCT 98
confers on him the right to deduct liquidated damages once the architect
has issued a certificate under clause 24.1 and the employer has given written
notice of intended deduction to the contractor. Once these two conditions
are satisfied the employer has a contractual right to deduct liquidated
damages - and clause 24.2.2 deals with what is to happen if the completion
date is later altered in the contractor's favour. The employer cannot be in
breach of contract by doing that which the contract expressly empowers him
to do.

376 Holbeach Plant Hire Ltd v. Anglian Water Authority (1988) 14 Con LR 101. The court was applying the
proposition laid down in President of India v. LipsMaritime Corporation [1987] 3All ER 110 at 116 per Lord
Brandon. The position under JCT forms is dealt with in section 6.5.8, 'Financing charges and interest'.
377

(1982) 19 BLR 1.