retention money

The tax point for the payment of retention money is the date when you either:

It can fulfil a function similar to retention moneys in a building contract.

At the expiry of this period, 27 August 1991, subject to any defect being repaired, the contractor's claim for payment of the retention money would become enforceable.

A dispute arose between the bank and the respondents in the present case, the joint liquidators of the contractor, as to who was entitled to payment of the balance of the retention money.

The court held further that the certificate of completion signified the coming into existence of a right to claim payment of the retention money subject to a suspensive condition, namely the repair of any defects which might manifest themselves during the retention period.

Accordingly, by virtue of the cession of 31 December 1984, the contractor's right to claim payment of the retention money when it came into being on 27 August 1990 (even though that right was subject to a suspensive condition), had been transferred to the bank.

On 10 June 1991, a progress certificate was issued, certifying that the balance of the retention money amounted to a sum of R1,106,376.37, payable when a final certificate of completion was issued by the project's engineer within fourteen days of the expiration of the retention period.

Under the Institution of Civil Engineers' Conditions of Contract (fifth edition), retention money is repaid to a contractor in two stages, the first within 14 days after the certificate of completion has been issued, the remainder within 14 days after the end of the period of maintenance.

The joint liquidators applied to a Provincial Division for a declaratory order that, on a proper construction of the contract of cession, no security had been conferred on the bank in respect of retention money certified in terms of the contract for payment by the employer subsequent to 10 June 1991.