Jawaby Property Investment Ltd v The Interiors Group Ltd & Anor

Under a construction contract incorporating a statutory interim-payment regime, a contractor’s application must be an unambiguous statement of the sum considered due at the relevant due date. It must satisfy the requirements of substance, form and intent. A document described as an initial or provisional assessment will not trigger the payment regime. A prior course of dealing may waive strict contractual requirements or create an estoppel, but only within the scope of the established practice. A pay less notice also requires an objectively ascertainable intention to serve that notice. Informal valuation material will not be treated as a pay less notice where the parties’ practice distinguishes it from formal notices.

The claimant, the freehold owner of a property, brought a Part 8 claim against the contractor and its director concerning payment obligations under a JCT 2011 Design and Build Contract and a related escrow agreement. The contractor had submitted a valuation by email. The employer’s agent later sent an email with marked-up valuation material and an explanation of an earlier certificate of payment.

The claimant sought declarations that the valuation was not a valid interim application or, alternatively, that the later email was a valid pay less notice. The central questions were whether the valuation triggered the contractual payment regime and whether the later email prevented a default under the escrow agreement.

1. Interim-payment regime. The contractual provisions reflected sections 110A and 111 of the Housing Grants, Construction and Regeneration Act 1996. Their effect was to require payment of the notified sum by the final date for payment, even if the valuation was inaccurate, unless the employer served the required notice.
2. Validity of the valuation. An interim application had to be an application in substance, form and intent, stating the sum the contractor considered due at the relevant due date and being free from ambiguity. The court applied the approach in Henia Investments v Beck Interiors [2015] BLR 704, with the document construed objectively in context. The description of the document as an “initial” assessment indicated provisionality. It did not state what the contractor considered due for the purposes of clause 4.8.1. The valuation also failed to value the works up to the relevant due date.
3. Course of dealing. Earlier email valuations established a limited convention that documents in that established form would be treated as interim applications. That convention did not extend to the materially different initial assessment. The employer’s agent had sufficiently broad authority under Article 3 to bind the employer within the scope of the course of dealing.
4. Pay less notice. The later email was objectively intended to provide marked-up valuation material and explain the earlier certificate of payment. It was not intended to operate as a pay less notice. The parties had previously used formal documents for that purpose, and there was no equivalent course of dealing supporting informal notice.
5. Outcome. The contractor had not made a valid interim application on 7 January 2016. Consequently, no default had occurred under the escrow agreement. The parties were directed to draw up an order and agree consequential matters, including costs where possible.