Citation: [2025] EWHC 100 (TCC)
Background
CAR sought to enforce an adjudicator’s decision arising from a so-called smash and grab adjudication by summary judgment. For its part Placefirst sought a final decision, in part 8 proceedings, on the dispute and relied upon that claim as a defence to the adjudication enforcement. There was no other defence to the adjudication enforcement.
At a contested hearing on 13 December 2024 the court ruled that the two sets of proceedings should be heard together, in circumstances where the TCC in Manchester had a whole day available to hear the summary judgment application on 20 December 2024.
The underlying dispute arose from an interim payment application made by CAR (subcontractor) to Placefirst (main contractor) under an amended JCT design and build 2016 subcontract.
In response to the application for payment Placefirst had issued an email with the subject line “… Car Construction Payless Notice and Valuation 30” and enclosing two attachments: a payless notice and an MS spreadsheet entitled “… Valuation 30”. The email itself described these documents as “the attached Payless Notice and Valuation 30 to support”. The payless notice itself referred to valuation 30 “which has been enclosed for your information”.
CAR’s position, which the adjudicator upheld, was that (1) this material was clearly a payless notice rather than a payment notice, (2) as such it was invalid on the basis that an effective payless notice cannot be issued in response to an application for payment until that application has become the effective payment notice. The paying party therefore has to wait until the time for it to issue a payment notice has passed before it can respond to the payee’s application for payment with a valid and effective payless notice. A payless notice issued before that time is ineffective. (In fact CAR pointed this argument out to Placefirst, but only once it was too late for Placefirst to issue a fresh payless notice.)
In the court proceedings Placefirst contended that there was nothing to prevent a party from issuing a payless notice once it has the payee’s application notice. The only restriction that might make a payless notice too early is that imposed by section 111(5)(b) of the 1996 Act which provides that the payless notice cannot be issued in advance of the application.
In the alternative Placefirst contended that the spreadsheet referred to as “Valuation 30” was self-evidently effective as a payment notice, notwithstanding the fact that it was served with the payless notice. In particular within “Valuation 30” there was a workbook or tab headed “subcontract payment certificate” which was clearly intended to perform, and did in fact perform, all of the functions of a payment notice. The term “payment certificate” is equivalent to payment notice, as per the comments by Coulson LJ in the first instance decision in Grove Developments Ltd v S&T (UK) Ltd [2018] EWHC 123 (TCC) (footnote 9). The fact that the spreadsheet was provided with a (separate) document that clearly was intended to be a payless notice did not negate the effectiveness of the payment certificate. In short Placefirst had issued two documents: a payment certificate (ie a payment notice) and a payless notice.
Decision
Judgment for Placefirst. It had served both a valid payment notice, and a valid payless notice. In the circumstances the court declined to enforce the adjudicator’s decision.
Payless Notice
The dispute related to the further requirements in sections 111(2)(b) and (c). Under these provisions a notice is not valid if it is served before the notice by reference to which the notified sum is determined.
Subsections 2(b) and 2(c) apply where a notice complying with section 110A(3) has been given pursuant to a contractual requirement. Section 110A(3) provides that a notice is compliant if it specifies the sum the payee considers to be due at the payment date, and the basis on which that sum is calculated.
Under clause 4.6 of the subcontract, CAR was required to submit an interim payment application which included a statement of sum owed, and the date when the interim payment was to be calculated, and the basis on which it was to be calculated. This amended wording differed from the ordinary wording of the standard form, and therefore brought the notice given under the subcontract into compliance with section 110A(3). This reading meant that CAR had issued a valid payment notice (i.e. the interim payment application) meaning Placefirst had not given its payless notice before the notice determining the notified sum. The payless notice was therefore valid.
Payment Notice
Although the decision on the payless notice was sufficient to determine the dispute in Placefirst’s favour, the Judge considered whether the workbook, sent together with the payless notice, amounted to a valid payment notice. The issue was whether the purported payment notice was intended to be separate and distinct from the payless notice with which it was sent.
The Judge found that it was because the substance of the workbook amounted to a payment notice. It was described as a valuation and a subcontract payment certificate, which one would expect to find in a payment notice. Further, the workbook was obviously not “purely subsidiary” to the payless notice. These factors, when read in the context of the 1996 Act and the subcontract, and in the context of how interim payments are commonly dealt with, suggested that on an objective analysis, the workbook was plainly intended to be a payment notice, distinct from the payless notice with which it was sent.
