Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd

An interim payment application under a construction contract is valid if it is clearly identifiable, states the sum claimed and gives the basis of calculation. Additional contractual requirements for supporting information may affect the valuation of individual claims, but deficiency in substantiation does not ordinarily invalidate the application. The employer must protect its position through timely payment or pay less notices. Parties may agree when emailed notices are deemed served, provided the statutory payment regime is not frustrated. Where no valid notice is served, the notified sum must be paid for that interim application and cannot be re-valued in a later adjudication, although substantive rights remain open in later payments and final accounting. A stay of enforcement is exceptional.

These conjoined proceedings concerned interim payment application No.19 under a JCT Design and Build Contract 2011 edition for refurbishment and development works. Bray’s application was made on 5 August 2016. An adjudicator found it valid, held that no valid payment or pay less notice had been served, and ordered payment of £1,131,751.96 plus VAT, interest and expenses.

Kersfield sought a substantive determination, a declaration that the underlying valuation could be referred to a further adjudication, and a stay of enforcement. Bray sought summary judgment enforcing the adjudication decision. The issues included validity, estoppel, notice timing, procedural fairness, revaluation and execution of the judgment.

Disposition. Bray was entitled to summary judgment for £1,131,751.96 plus VAT, interest and adjudicator’s fees and expenses. The adjudication decision was valid and enforceable. A stay of execution was refused.

1. Validity of the application. An interim application had to be sufficiently clear and unambiguous, identify itself as an application for payment, state the sum considered due and state the basis on which it was calculated. The court applied the approach in Caledonian Modular Ltd v Mar City Developments Ltd [2015] EWHC 1855, Henia Investments Inc v Beck Interiors Limited [2015] EWHC 2433 and Jawaby Property Investment Limited v The Interiors Group Limited [2016] EWHC 557. Contractual requirements for further information and substantiation were permissible, but the absence or inadequacy of substantiation affected the individual claim rather than the validity of the application. The employer’s remedy was to issue a payment notice excluding the claim or a pay less notice deducting it.
2. Estoppel and approbation. The court’s findings on estoppel by convention were unnecessary but were given for completeness. There was no shared assumption that unsubstantiated claims would be accepted, and payment on earlier applications was equivocal. The principle of approbation and reprobation required an election between inconsistent rights. Bray had not made such an election because it reserved its right to claim the larger sum while invoicing the lesser sum acknowledged by Kersfield.
3. Payment and pay less notices. Kersfield’s payment notice was late. The consequence was that Bray’s application became the notified sum, subject to any valid pay less notice. The emailed pay less notice, sent after 4 pm on Friday, was deemed served on the next Business Day under the agreed contractual provision and was therefore late. Sections 115 and 116 of the Housing Grants, Construction and Regeneration Act 1996 permitted the parties to agree the manner and deemed timing of electronic service.
4. Further adjudication. In the absence of a valid payment or pay less notice, the default mechanism fixed the sum payable for the relevant interim application. There was no contractual basis for revising that sum by a later adjudication concerning valuation. Section 111(8) applied where a valid notice identified competing valuations; it did not empower an adjudicator to revise the notice. The substantive valuation, claims and cross-claims remained open for later interim payments and the final account.
5. Procedural fairness and stay. The adjudicator considered material submitted by both parties and gave Kersfield an opportunity to respond. There was no procedural unfairness. Applying the principles in Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC 1086 and Wilson & Sharpe Investments v Harbour View Developments Ltd [2015] EWCA Civ 1030, the court found no sufficient risk that Bray could not repay the judgment sum. Kersfield’s inability to pay created hardship, but a stay on that basis was rare and exceptional; with the competing hardship finely balanced, enforcement was favoured.

Costs were to be dealt with after further submissions.