Share:
By Ava Solouk, Trainee
This case is regarding a Part 7 claim by CAR Construction (North East) Limited (“CAR”) against Placefirst Construction Limited (“Placefirst”) for the enforcement of an adjudicator’s decision made on 18 October 2024, awarding CAR £867,031.36 plus VAT, for a valid interim payment application where there was no payment notice or valid pay less notice, and a Part 8 claim by Placefirst against CAR, seeking a final determination that it had served a valid payment notice and/or a valid payless notice.
On 26 October 2022, Placefirst, as Contractor, engaged CAR, as Subcontractor, on a construction project at Ridding Road, Esh Winning, Durham, under a JCT Design and Build 2016 Subcontract as modified by a schedule of amendments (the “Subcontract”). On 24 July 2024, CAR submitted a valid interim payment application (the “Interim Payment Application”) and on 31 July 2024, Placefirst submitted an email attaching its purported payless notice and an excel spreadsheet titled “Valuation 3O” (the “Payment Notice / Payless Notice”). The dispute between the parties was whether Placefirst served a valid Payless Notice and/or whether it served a Payment Notice. Determination of either question in Placefirst’s favour would invalidate the adjudicator’s decision and would result in the enforcement not succeeding.
CAR’s case was that the purported Payless Notice was invalid because it was served before the date when it could have validly been served under the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “Act”) and/or the Subcontract. There was no dispute as to whether the contents of the purported Payless Notice complied with the Act and/or Subcontract. The dispute was whether it complied with s111(5)(b) of the Act, which stated that a Payless Notice “may not be given before the notice by reference to which the notified sum is determined.”
It was held that the Interim Payment Application submitted by CAR complied with the requirements of a payment notice under s110A(3) of the Act, even though it would not have the effect of a payment notice unless and until Placefirst had failed to give a valid payer’s payment notice. As the Interim Payment Application was deemed to be a valid payment notice under the Act and was submitted on 24 July 2024, Placefirst’s Payless Notice, which was subsequently submitted on 31 July 2024 was, therefore, not submitted before the payment notice and is a valid Payless Notice.
The Judge, however, went on to decide the case in the alternative, so in the event the above conclusion is wrong or does not apply, what is the date (or deemed date) of the payee’s payment notice. Placefirst argued that the Interim Payment Application is regarded as a payee’s payment notice and is to take effect on the date it was sent. CAR pleaded that a payee’s payment notice can only take effect after the date the payer’s payment notice was to be given, and so, on the facts of this case a payee’s payment notice cannot be made / be deemed a notice any earlier than five days after the payment due date (which is the final date the payer could submit a payment notice). It was held that whilst the Interim Payment Application will only become a payment notice when the time for Placefirst to give a payment notice has elapsed, there is no compelling reason why Placefirst should be unable to give a payless notice before that date, especially as there is no obligation to serve both a payment notice and a payless notice nor is there a difference in substance between the contents of the two. Placefirst’s choice to serve either one or the other does not prejudice CAR and so, a payless notice can be served before CAR’s Interim Payment Application has been deemed a payment notice. Therefore, Placefirst did serve a valid Payless Notice on 31 July 2024.
As it was held that Placefirst did serve a valid Payless Notice and there is no requirement to serve both a payment notice and a payless notice, it is irrelevant whether a Payment Notice was also served on 31 July 2024. However, for the sake of completeness the Judge also considered whether a Payment Notice was served.
It was held that sending a Payless Notice and a separate document (in this case an excel spreadsheet) which amounts in substance to a payment notice; is described as a valuation and a subcontract payment certificate; is plainly intended to have a formal effect under the contract separate from the payless notice; and is obviously not purely subsidiary to the payless notice, is sufficient, when read in the context of the Act and the Subcontract, to amount to a valid Payment Notice. Therefore, Placefirst did submit a valid Payment Notice on 31 July 2024.
This case emphasises that for a payless notice to be valid, it must be submitted after an interim payment application, whether or not the interim payment application has been deemed a payment notice, and not before. It also highlights that the payer does not need to submit both a payment notice and a payless notice.