Nominated Sub-contractors - Building Contract - page 418

the main contract. In my judgment there can be no doubt that that is the effect of clause 11(h)
of the FASS sub-contract. If authority be needed for that it can be found in the decision of
Wynn-Parry J in Re Tout & Finch Ltd (1954) . . .
In other words, the position as between employer, contractor and sub-contractor under the
present RIBA Conditions and the FASS sub-contract is that the employer holds a due propor-
tion of the retentions on trust for the contractor as trustee for the sub-contractor.
If the foregoing analysis is correct it would seem to follow that as and when the retentions
fall to be released the sub-contractor can require the contractor to recover the former's due
proportion from the employer. Moreover, whether he is required to do so or not, the contractor
can of his own volition take steps to recover all the retentions (including those payable to
sub-contractors) from the employer. Applying that to the present case it would mean, other
things being equal, that the liquidator was entitled, and for practical purposes bound, to
require payment from the council of the £1,374.56 due to the sub-contractors.
In general any power given by the contract to make direct payments to nominated sub-
contractors is ineffective whenever the contractor becomes insolvent because it will then
conflict with general principles of insolvency law.
B. Mullen & Sons (Contractors) Ltd v. Ross
COURT OF APPEAL IN NORTHERN IRELAND
(1996) 54 Con LR 163
CARSWELL LJ: Counsel for the appellant accordingly argued that the material property of the
contractor which vested in the liquidators consisted of a chose in action, the right to sue the
employers for payment of the moneys due to him, including that portion which he would
have to pay over to the sub-contractor. It was subject to a contingency, namely that the
employer might exercise his right to pay the sub-contractor direct. As Kerr J pointed out in
his judgment, however, the provision in the contract permitting this was an enabling provision;
the employers were entitled, but not obliged, to make such direct payments, which is a direct
point of distinction between this case and Glow Heating Ltd v. Eastern Health Board . In our
opinion the matter is determined by the effect upon the operation of the pari passu principle
of such exercise of the employers' right after the commencement of the liquidation. Until the
winding-up resolution was passed, the contractor's interest may have been defeasible by the
exercise of the employers' right to make direct payment. Once the company went into liquida-
tion, however, the exercise of the right would remove the sum so paid from the property which
should come to the hands of the liquidator, so reducing the amount divisible among the
general creditors, and such a result would offend against the pari passu principle. It therefore
is in our opinion void and the employers have not been entitled to exercise the right of direct
payment to the sub-contractor since McLaughlin & Harvey plc went into liquidation.
'Delay on the part of nominated sub-contractors or nominated suppliers' in JCT 98, clause
25.4.7 (JCT 63, clause 23(g)) means a delay on the part of the nominated sub-contractor before
the date of completion. It is apparent completion which matters and if the sub-contractor's
work proves to be defective, the delay caused by his subsequently returning to site is not within
the provision.