Another perspective on how a contractor can go about enforcing a judgment on payment pursuant to an interim certificate, writes Barrett Chapman

Since last month’s article on obtaining and enforcing judgment pursuant to an Interim Certificate, it has come to the author’s attention that Clarke J. in the recent High Court case of Moohan & Anor v S. & R. Motors (Donegal) Limited, adopted a slightly different approach on the issue of payments due pursuant to interim certificates than that stated in John Sisk and Son Ltd. v. Lawter Products B.V.

Clarke J. in the High Court in the Moohan case held that an Employer’s entitlement to a right of set off in equity in respect of defective works can be negated by the terms of the contract.

Clarke J. concluded that the terms of RIAI 2002 Contract were not sufficient to exclude set off after practical completion had been certified.

As a result the Employer could exercise set off against the Contractor’s claim for amounts certified in earlier unpaid interim certificates. Whilst this case was specific to circumstances where a certificate of practical completion had issued, there would be scope for an Employer to argue that it would have a right of set off where the RIAI 2002 contract was used, even in circumstances where the certificate of practical completion had not yet issued.

This month’s article will consider the steps necessary for a Contractor to obtain judgment pursuant to an interim certificate and how a Contractor can go about enforcing such a judgment.

The most common procedure for a Contractor to obtain judgment on foot of an interim certificate is by issuing a summary summons in the High Court where the amount owing on one or more interim certificate(s) is in excess of e38,092.14. Where lesser sums are outstanding, the proceedings should be initiated in the Circuit or District Courts.

If the matter is non-contentious and the Employer fails to reply to the service of proceedings or decides not to defend the proceedings, a “fast track” procedure exists in which judgment can be obtained by lodging certain documents in the Central Office of the High Court. This procedure is quick and relatively inexpensive.

The Master may, following issue of a Motion for Judgment in the Summary proceedings, in uncontested cases, deal with the matter summarily, and give liberty to enter judgement. Where the defendant has shown a prima facie defence, the Master will transfer the case to the High Court list for hearing.

The Master may also, on consent, adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with directions as to pleadings, discovery, settlement of issues or otherwise. If the Master does not grant judgment and the matter is transferred to the Court list or remitted to plenary hearing, it will take some time, possibly even one or two years, for the matter to come to a full hearing before the High Court.

A further, even quicker, option now exists where the amount claimed is in excess of e1 million. A Contractor can apply to have the proceedings transferred to the Commercial Court. That Court has been known to make directions regarding the exchange of affidavits in a very short period of time and to hold a hearing within two weeks. At such hearing, judgment could be granted.

Unfortunately, obtaining a judgment does not guarantee payment. If the Employer is still unwilling to pay the debt a number of options are available to the Contractor including:

• The judgment can be sent to the local
  Sheriff for execution by the seizure of the Employer’s assets;
  
• If the judgment is registered in the High
  Court, it will be listed in Stubbs Trade
  Gazette and possibly in newspapers. Such
  adverse publicity for an Employer may be
  unwelcome;
  
• A judgment mortgage may be registered
  against real property of the Employer;
  
• Initiating bankruptcy, or liquidation, proceedings against the Employer, as appropriate. Prior to doing so, the Contractor ought to enquire as to the Employer’s financial status including whether there are any higher ranking creditors which would be entitled to some or all of the Employer’s assets before any distribution to the Contractor.

A Contractor that holds an interim certificate will be entitled to payment in full, provided that the terms of the contract are sufficient to negate any right to set off.

However, even where a Contractor is in a strong position legally, it may be of little use where the Employer is unable to pay. The success of the debt recovery procedures outlined above is dependent on the Employer’s ability to pay.

If the Employer simply does not have the funds, then ultimately there may be little that a Contractor or any debtor can do to actually recover money.

This article was written by Barrett Chapman at McCann FitzGerald Solicitors

This article appears in the December 2008 edition of Irish Construction Industry Magazine