Placefirst Construction Ltd v CAR Construction (North East) Ltd [2025] EWHC 100 (TCC) provides current TCC guidance on payment and pay less notices. It also showcases a classic example of confusion caused when contractual payment processes are not followed properly.

What happened

CAR won a smash and grab adjudication. Placefirst challenged enforcement using a Part 8 claim for a determination that, contrary to the adjudicator’s decision, it did not have to pay CAR £867,000 plus VAT. 

The amended JCT DB 2016 contract stated:

• Placefirst was to issue a payment notice five days after the due date citing the sum due and basis for its calculation (“Notified Sum”), or CAR’s application would be a payment notice in default.
• The Notified Sum had to be paid by the final date for payment, unless Placefirst issued a pay less notice at least two days beforehand.

CAR had applied for payment and Placefirst had responded with one email containing two documents; one described as both “Valuation 30.xlcm” and “payment certificate”, and the other as a “pay less notice”. CAR argued that Placefirst had not issued a payment notice, and that the pay less notice was invalid because it was issued too early. The adjudicator agreed, but Placefirst insisted its notices were valid.

The Court’s decision

Placefirst won. The judge decided Placefirst’s payment and pay less notices were valid, applying this guidance from HHJ Smith in Advance JV v Enisca Limited [2022] EWHC 1152 (TCC):

• Provided statutory and contractual requirements are met, the question of whether a notice is valid is one of fact and degree.
• Notices should be construed objectively, with their purpose in mind, and within their “relevant objective contextual scene”, so reasonable recipients are credited with knowledge of the contract (including the harsh consequences for payers (whether employers or main contractors) for failing to comply).
• A practical, common-sense interpretation should be applied that is not unnecessarily restrictive and ignores artificial criticisms on technical points.
• If, on an objective reading, the document was intended to be a notice or could set the agenda for an adjudication, it probably is a notice – even if it isn’t called “notice” and doesn’t reference the relevant clause.

Placefirst’s payment notice

Title: Despite not identifying itself as a “notice” and being sent at the same time as a pay less notice, the substance of Valuation 30 met the criteria for a payment notice. It helped that it was also named as a “certificate”, being the previous terminology for payment notices.

Timing: Section 110A of the Construction Act states that the notice must specify the sum considered “to be or to have been due at the payment due date”. The judge did not consider it a problem that the date of Valuation 30.xlcm preceded the due date, but it did not state expressly that the payment calculated was what Placefirst considered due “at the due date”. Valuations are often conducted before the due date but the payment notice does not have to spell out in terms that the resulting sum is the one considered due on the due date.  

Amount: Payment notices can state a negative sum. Zero valuations are expressly permitted by the Construction Act, but this does not mean negative valuations are prohibited. Whether that creates a contractual obligation on the recipient of the notice to pay was not addressed.

Pay less notice

It was agreed that the substance of Placefirst’s pay less notice met the requirements, the issue was its timing. CAR said it was issued too early, relying on section 111(5)(b) of the Construction Act to say a pay less notice could not be given before the notice by reference to which the Notified Sum is determined. That would be either the date of a valid payment notice, or, if there wasn’t one, when the payment application became a notice in default. CAR said that scuppered Placefirst’s pay less notice, because it had been issued before the Notified Sum was determined by a payment notice or the application becoming the notice in default.

The judge threw the pay less notice a life-raft. There was no reason why a pay less notice could not be issued before the deadline for serving a payment notice passed, provided an application had been made. Practically speaking, what would become the Notified Sum would be clear from the contents of the application even if it had not yet become a payment notice in default. 

Consequently, Placefirst succeeded in its Part 8 claim that both notices were valid, which meant that the smash and grab adjudication result was not enforced. 

What can we take from this?

• The court focused on the substance of the notices, not their form. It is best practice to spell out what kind of notice you are drafting and under what clause because this avoids arguments and associated time, cost and angst. But there is hope for those who do not follow this best practice guidance.
• The liberal approach to timing requirements here might facilitate some arguments against smash and grab adjudications, which are otherwise hard to defend.
• Payment and pay less notices can be served at the same time, but despite the contents being very similar, the same document cannot do both jobs. The documents need to be separate to each other. Good practice would be to use separate emails; one for the payment notice and one for the pay less (with the payment notice ideally being sent first; see point 4 below), because that makes everything clearer.
• Pay less notices can be served “early”; i.e. after an application but before a payment notice is issued or the application becomes a payment notice in default. The danger here is that there may still be time to serve a payment notice, which could invalidate the pre-existing pay less notice by creating a new and different notified sum. Logically, it makes more sense and avoids confusion to stick to the usual order of application followed by a payment notice, followed by a pay less notice (if necessary).
• Clause 4.6.2 in the JCT DB SC 2016 requires the subcontractor’s application to identify the sum that “will” be due on the due date. The judge suggested this is contrary to the Construction Act’s requirement to state the sum “to be or to have been due” at the due date. Clause 4.6.2 was amended in this case, so the point was not analysed in detail, but parties using this (or other JCT forms) in future might want to consider amending the clause.

Final word: Notices are so important to preserving your entitlement to payment – or to hold money back – that you need to understand and follow the contractual requirements to the letter. Following the contract would have saved an adjudication, a TCC claim, and all the costs, time and stress that went with it on this one.