Payment - Scottish Construction Contracts - page 225

Certificate and this statement is issued to the Contractor. Thereafter, the Contractor
can request the Employer, at the date of payment under each Interim Certificate, to
placetheRetentiontobedeductedinaseparatebankaccountandcertifythatthis
has been so done, see clause 4.18.3. It appears that the Contractor can also make this
requestatalaterdateifhehasnotdonesoatthedateofpayment,see JFFinneganLtd
v. Ford Sellar Morris Developments Ltd (1991). (1991).The Employer is entitled to any interest
accruing on the Retention while it remains in this separate account.
8.6.3 Retention under the SBC/DB
The position in respect of retention under SBC/DB is almost identical to the position
under the SBC. Clause 4.7.2 of the SBC/DB provides that the sum due as an interim
payment shall be the gross valuation of the work carried out by the Contractor, less
any Retention which may be deducted and retained by the Employer as provided for
in clauses 4.16-4.18.
Clause 4.18 provides that the Retention which the Employer may deduct and retain
shall be a percentage of the total amount included under clause 4.13.1 (Stage Pay-
ments) or 4.14.1 (Periodic Payments) in the gross valuation for any interim payment.
The percentage ('Retention Percentage') is stipulated to be 3% unless a different rate
is agreed between the parties and inserted in the Contract Particulars.
The Retention Percentage may be deducted from the amount certified in any
InterimCertiicateinsofarastheamountcertiiedrelatestoworkwhichhasnot
reached practical completion. Where the work has reached practical completion but
no Notice of Completion of Making Good has been issued, then the Employer may
only deduct half the Retention Percentage. As under SBC, half the Retention is then
released on practical completion of the works with the remaining half being released
on the issue of a Notice of Completion of Making Good.
AswiththeSBC,theSBC/DBstipulatesthattheEmployer'sinterestintheretention
is fiduciary as trustee for the Contractor (see clause 4.16.1), and the Contractor can
request the Employer, at the date of each Interim Payment, to place the retention to
be deducted in a separate bank account and notify the Contractor that this has been
so done (see clause 4.16.2.).
The objective of clause 4.18.3 of the SBC and clause 4.16.2 of the SBC/DB is to
provide a mechanism whereby the Retention deducted by the Employer is to be held
in trust on behalf of the Contractor, see Wates Construction (London) Ltd v. Fran-
thom Property Ltd (1991). This is to afford the Contractor a degree of protection in
the event of the insolvency of the Employer. If it is not placed in a separate account,
then it appears that the Contractor will have no protection, see Mac-Jordan Construc-
tion Ltd v. Brookmount Erostin Ltd (1991). If the Employer fails to put the money in a
separate account, then the Contractor's remedy would be an action for specific imple-
ment (see Section 10.3). Unless an interim order can be obtained, given the time it
maytaketoconcludesuchanaction,thisremedymaybeoflittlepracticalassistance.
This is particularly so in cases where the Employer disputes that the Contractor is
entitled to the retention because the Employer has other claims which he wishes to
meetoutofthecontractualretention,forexample,liquidateddamages,see Henry Boot