If you don’t get your Notices right, the consequences can be seen below.
Kersfield Developments (Bridge Road) Ltd (“Kersfield”) appointed Bray and Slaughter Ltd (“B&S”) as the Contractor under an amended JCT DB 2011 contract.
The contract provided that:
- Notices concerning payment delivered by hand or by email should be received by 4pm on a business day otherwise they would be deemed served on the next business day
- Applications for payment should be accompanied by further information as specified in the Employer’s Requirements
- Payment Notices were to be served no later than 5 days after the “due date”
- Pay Less Notices were to be served no later than 5 days before the “final date”
B&S submitted an interim application on Friday 5 August 2016. The final date for payment was Friday 19 August 2016.
Kersfield’s QS served a Payment Notice on Friday 12 August 2016, which was 2 days late.
Realising its error Kersfield’s QS issued a Pay Less Notice by email at 9.50pm on Friday 12 August 2016. Under the contractual notice provisions, the Pay Less Notice was deemed served on the next business day, i.e. Monday 15 August 2016. This was 1 day late.
On Wednesday 17 August 2016, B&S issued an invoice for the amount stated in the Payment Notice. Kersfield eventually paid the invoiced amount, but B&S subsequently referred the disputed balance of the application to adjudication.
The adjudicator decided that the interim application was valid, that no valid Payment or Pay Less Notice had been served and so awarded B&S the full amount applied for.
The Court agreed:
- The contract provisions concerning the service of notices were sensible and provided certainty
- As a minimum, applications for payment must state the amount applied for and the basis upon which that amount has been calculated. Applying the objective “substance, form and intent” test, the fact that an application was not accompanied by all required information did not necessarily invalidate it. There was no express term stating that the lack of accompanying information would render an application invalid and no such term would be implied
- The Payment Notice was served late and so the amount applied for became the “notified sum”
- Kersfield could not rely on the fact the B&S had issued an invoice for a lower sum (i.e. the amount stated in the "Payment Notice”)
- The Pay Less Notice was served late
Therefore, B&S was entitled to the full amount of its application.
The Court also rejected Kersfield’s contention that it was entitled to refer the “proper valuation” of the application to adjudication; to do so it would have to challenge the valuation of a subsequent application:
"…where a particular interim payment has been fixed by the default notice mechanism under the contract, there is no contractual basis on which to revise that payment by reference to a proper valuation of the works and therefore there is no relevant dispute that can be referred to adjudication.”
COMMENT: this judgment is not surprising and again demonstrates the need for strict compliance with the contractual requirements for the timing of notices.