Update On Payment

Since we last looked at payment at the end of 2014 there have been three important decisions which have cast further light on the approach to payment (and adjudication) that is being taken by the Technology and Construction Court. Galliford Try Building Limited v Estura Limited [2015] EWHC 412 (TCC) looks at how work should be valued where no payment notice, default payment notice, payless notice or final certificate has been issued; Caledonian Modular Limited v Mar City Developments Limited [2015] EWHC 1855 (TCC) examines payment applications in the context of a final account settlement; and Leeds City Council v Waco UK Limited [2015] EWHC 1400 (TCC) deals with the validity of interim applications that were submitted both prior to and after the dates provided for by the building contract.

Galliford Try Building Limited v Estura Limited [2015] EWHC 412 (TCC)

The facts

Estura Limited ("Estura") engaged Galliford Try Building Limited ("Galliford Try") under an amended JCT Design and Build Contract 2011 ("the Contract") for the construction of the Salcombe Harbour Hotel in Devon. The contract contained Housing Grants, Construction and Regeneration Act 1996 ("Construction Act") compliant payment provisions and provided for interim payments to be made to Galliford Try in the usual way.

Near the end of the project, Galliford Try issued an interim application for £4m that it described as being an "indicative final account and valuation summary" ("the interim application") which came in at only around £4,000 less than the amount of the anticipated final account. Estura maintained that the sum due under the interim application was only £147,000 plus VAT, but it failed to serve a payless notice, as a result of which the £4m claimed by the interim application became the sum due.

Galliford Try initiated adjudication proceedings seeking payment of the Notified Sum and the adjudicator found in its favour. Estura then commenced a second adjudication seeking a declaration as to the true amount owing in respect of the interim payment application. The second adjudicator found that he had no jurisdiction in light of the decision of the first adjudicator, adopting the strict approach of the court in ISG v Seevic,1 namely, that in the absence of fraud, contractors are entitled to the amount stated in their payment application regardless of the true value of the work in circumstances where the employer has failed to serve a valid payless notice.

Estura continued to resist making payment and later resisted enforcement on the basis that the decision of the first adjudicator was misguided, and contrary to the earlier decision of the court in Harding v Paice2. That decision provided that any failure by the employer to serve a payless notice would not be critical to its ability to challenge the contractor's final account, as this would create a very unfair situation whereby the employer would be prevented from challenging the contractor's final account for all...

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