Contract Procedure Matters: Serve Those Notices To Protect Your Payment Position

Parties to a construction contract who have not been paid have a right to refer their payment claims to adjudication under the Housing Grants, Construction and Regeneration Act 1996 (as amended in 2011) (the Act). Adjudication is an essential tool for parties to enforce their contractual payment rights.

However, if payers do not comply with the notice procedures prescribed by the Act, the payee can start adjudication proceedings to recover - swiftly - payments they have applied for in what have become known as "smash and grab" proceedings. Payers can therefore end up having to make payments they do not consider due to a payee.

The question of whether (and when) such payers can start another adjudication to ascertain the true value owed to the payee (and recover any overpayment) has been considered at length by both the Technology and Construction Court (TCC) and the Court of Appeal (CA) recently in important decisions involving Grove Developments Ltd and S&T (UK) Ltd and, more recently, M Davenport Builders Ltd and Mr and Mrs Greer.

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Payers who haven't served payment/pay less notices must pay up first (the TCC's decision in Grove) Grove applied: M Davenport Builders Ltd v. Greer & another How to avoid similar payment disputes (serve those notices!) Does the Construction Act need to be amended to reflect Grove? Payers who haven't served payment/pay less notices must pay up first (the TCC's decision in Grove) In his first instance decision in Grove Developments Ltd v. S&T (UK) Ltd [2018] EWHC 123 (TCC), (Grove TCC), which we reviewed here Smash and grab adjudications - redressing the balance, Coulson J (as he then was) decided that:

if the paying party does not serve a pay less notice on time or at all, the payee is entitled to be paid the sum stated as due in its payment application. If the payer does not pay up, the payee can start an adjudication to recover the sum due. An adjudicator will likely uphold that claim and the court will likely enforce the adjudicator's decision; a payer who disagrees with the payee's valuation (and the adjudicator's decision) but who has failed to serve a pay less or payment notice can start a fresh adjudication to determine the true value payable but must first pay the sum stated as/found to be due. The payee contractor appealed on various issues, including whether the payer's pay less notice was valid and (the issue of most interest to the construction industry) whether the...