Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd

Construction payment notices must be construed objectively in their contractual and factual setting. An interim payment notice is valid where, in substance, form and intent, it clearly identifies itself as such, states the sum claimed and provides sufficient supporting valuation material. A formal heading or reference to the relevant clause is helpful but not essential.

A Pay Less Notice need not use that description or cite the contractual clause. The question is whether, viewed objectively, the documents convey the requisite intention and contain the required sum and calculation basis. A notice may operate contingently where the sender mistakenly maintains that no notice is required.

The Trust employed Logan under a JCT Intermediate Building Contract with Contractor’s Design 2011. After practical completion, no interim certificate was issued for the payment cycle ending on 24 August 2016. Logan emailed a document headed Interim Payment Notice on 20 September 2016. The Trust responded on 21 September with a Final Certificate and supporting valuation, stating that Logan’s notice was out of time and void.

An adjudicator held that Logan’s Interim Payment Notice was valid and that the Trust had not served a valid Pay Less Notice. The Trust brought a Part 8 claim seeking declarations that both conclusions were wrong. The issues were whether Logan’s document was a valid Interim Payment Notice and whether the Trust’s email and attachments constituted a valid Pay Less Notice.

1. Interim Payment Notice. The notice had to be considered against both the contractual and factual background. The continuing interim payment regime was relevant, notwithstanding the parties’ simultaneous final account discussions and the impending Final Certificate.
2. The test was whether the document was, in substance, form and intent, an Interim Payment Notice and was clear and free from ambiguity. Logan’s document expressly identified itself as an Interim Payment Notice, referred to clause 4.10, stated the relevant valuation date, and contained detailed supporting information. The reference to valuation number 24 was appropriate because this was the twenty-fourth payment cycle. The document was therefore valid.
3. Pay Less Notice. Clause 4.12.1 required the notice to state the sum considered due at the date of the notice and the basis of calculation. The Trust’s email and attachments supplied both matters. It was immaterial that the documents did not use the words Pay Less Notice or refer expressly to clause 4.12.
4. The sender’s intention was to be assessed objectively by reference to the message and purpose conveyed to a reasonable recipient. The Contract Administrator’s mistaken assertion that Logan’s notice was out of date and void did not prevent the documents from having a contingent purpose: if that view was wrong, the valuation in the Final Certificate stated the sum the Trust contended was payable in response to the interim notice.
5. The valuation date in the Trust’s documents differed from that in Logan’s notice, but that did not invalidate the notice. A Pay Less Notice concerns the sum considered due when the notice is given. The documents also provided an adequate agenda for any adjudication concerning the true value of the works.

The court granted the declaration that the email and attachments sent on 21 September 2016 constituted a valid Pay Less Notice. Consequential matters were reserved.