This Article was published in Contract Journal, 27 February 2008, page 1. Peter is the Managing Director of P J English Associates Ltd, one of our Associate Members.

Court orders Barratt to pay back subby's 3% bill cut

A glazing contractor has won a legal test case against Barratt after the housebuilder deducted 3% from its agreed payments.

An adjudicator has ruled that Barratt "improperly withheld" the cash and the ruling could open the floodgates for hundreds of specialist contractors to launch legal battles against housebuilders.

Southern Glass Services (SGS) decided to fight Barratt Southampton after winning contracts to fabricate, supply and install glazing on two phases of the Ocean Boulevard project in the city.

Rates were agreed in early 2005, but Southern received letters from Barratt later that year and in 2006 stating that discounts would be taken from payments to the firm. Southern waited until after the project's completion last September to go to adjudication and a ruling was made last week.

The adjudicator found that there was no contractual basis for the deduction and ordered that the discounts - running to more than £19,000 - must be returned.

Barratt was also ordered to pay interest on the money it had hung on to. The figure came to £5,400 because the contract had been running for more than two years and the adjudicator set monthly interest rates of 8% plus bank rate.

Southern's victory will encourage hundreds of trade contractors hit by the current round of discounting by housebuilders including Taylor Wimpey, Barratt and Bellway.

Southern launched its fight after consulting with dispute resolution specialist PJ English Associates.

Director Peter English, who fought the case, said: "During the case Barratt presented no evidence. It admitted that it had no evidence or any contractual right to take the 3% discount and it admitted it had no evidence showing SGS's acceptance of its move.

"At the end of the day Barratt's case was that the subcontractor had accepted the situation by their silence.

"The adjudication was swift and clean and I've already started talks with four other Barratt subcontractors who worked for various Barratt divisions.

"The message to everyone out there is that they should resist these moves. Write back saying you disagree with the imposition of the discount.

"If you are part-way through a contract then you should continue working because you can't take the adjudication route until the end.

"It's a clear-cut issue: unless the contract says so, there is no entitlement under law for any client or main contractor to take a discount over and above what has been agreed in the contract."

John Palmer, SGS sales and marketing director, said: "Justice has prevailed."

A spokesman for Barratt said: "This case is unique. Southern Glass only raised the issue of the cash deduction 15 months after the end of the period of its deduction. We have no ongoing business with Southern Glass."

John Leitch - johnleitch@rbi.co.uk