Summary
A payment or pay less notice is construed objectively, in its factual context, by asking how a reasonable recipient would understand it. Incorporation by reference is permissible where the referenced document is clearly identified and enables the recipient to understand the sum and its calculation. Validity remains a matter of fact and degree.
Where an employer has failed to serve an effective payment or pay less notice, it must pay the sum stated as due, but may thereafter commence a separate adjudication concerning the true value of the relevant application. The notice regime regulates cash flow and does not deem the stated sum to be the true valuation.
Contractual notices concerning liquidated damages are effective where sent and received in the required sequence, absent any specified interval between them.
Factual background
The claimant employer engaged the defendant contractor under a JCT Design and Build Contract 2011 for the construction of a hotel. Following adjudications concerning incorporation of amendments, extension of time and payment, the parties disputed the validity of the employer’s pay less notice and the enforceability of the third adjudication decision.
The court also considered whether the employer could seek a separate adjudication as to the true value of an interim application if its payment notices were ineffective, and whether notices concerning liquidated damages had been served in the required sequence.
Held
- Pay less notice. The notice was valid. It clearly identified the sum said to be due, the liquidated damages deduction and the earlier payment certificate containing the detailed valuation. A reasonable recipient would have understood the calculation. The contract required specification of the basis of calculation, not transmission of every supporting document at the same time. The contrary construction was artificial and contrived.
- The construction of payment and pay less notices is objective and contextual. The notice must make clear its contractual character, the sum said to be due or deducted, and the basis of calculation. Whether those requirements are met is a matter of fact and degree. The same general approach applies to contractor and employer notices.
- The third adjudication decision was not enforceable. The court had finally determined the only dispute referred in that adjudication, namely the content of the pay less notice. The first adjudicator’s decision concerning incorporation of the Schedule of Amendments also remained binding, so the notice was served within the applicable contractual period.
- True value. On the assumption that the employer’s notice was deficient, the employer would still have been entitled, after paying the sum stated as due, to commence a separate adjudication concerning the true value of the interim application. The court and adjudicator had power to open up, review and revise notices and applications. The valuation dispute was different from the notice-validity dispute and had not been decided in the earlier adjudication.
- The contract distinguished between “the sum due”, representing the contractual true valuation, and “the sum stated as due”, which became payable under the notice regime. Failure to serve an effective notice did not create a deemed agreement that the contractor’s figure was the true value. The same principle applied to interim and final payments. The court declined to follow the different approach in ISG Construction Ltd v Seevic College and Galliford Try Building Ltd v Estura Ltd, considering there was a powerful reason to do so.
- Liquidated damages notices. The warning and deduction notices were sent and received in the required sequence. Clause 2.29 prescribed no minimum interval between them. Their validity was therefore not affected by the fact that they were received only seconds apart.
- Issues A, B, C and D were decided in Grove’s favour. No interest was payable on the agreed basis.
The court’s approach to earlier authorities
Available to signed-in members.
Appeal route
- This judgment [2018] EWHC 123 (TCC) High Court (Technology and Construction Court)
- Appealed to[2018] EWCA Civ 2448Outcomeappeal dismissed (unanimous)
Key cases cited
The 30 most senior of 31 authorities cited.
- Willers v Joyce (No 2) [2016] UKSC 44
- Aspect Contracts (Asbestos) Limited v Higgins Construction Plc [2015] UKSC 38
- Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266
- Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749
- Adam Architecture Ltd v Halsbury Homes Ltd [2017] EWCA Civ 1735
- Brown & Anor v Complete Buildings Solutions Ltd [2016] EWCA Civ 1
- Harding (t/a M J Harding Contractors) v Paice & Anor [2015] EWCA Civ 1231
- Wilson and Sharp Investments Ltd v Harbour View Developments Ltd [2015] EWCA Civ 1030
- Quietfield Ltd v Vascroft Contractors Ltd [2006] EWCA Civ 1737
- Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358
- Henry Boot Construction Ltd. v Alstom Combined Cycles Ltd. [2005] EWCA Civ 814
- Rupert Morgan Building Services (Llc) Ltd. v Jervis & Anor [2003] EWCA Civ 1563
- Systems Pipework Ltd v Rotary Building Services Ltd [2017] EWHC 3235 (TCC)
- Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2017] EWHC 1763 (TCC)
- Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd [2017] EWHC 15 (TCC)
- Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd [2017] EWHC 17 (TCC)
- Muir Construction Ltd v Capital Residential Ltd [2017] CSOH 132
- Kilker Projects Ltd v Purton (t/a Richwood Interiors) [2016] EWHC 2616 (TCC)
- Jawaby Property Investment Ltd v The Interiors Group Ltd & Anor [2016] EWHC 557 (TCC)
- Severfield (UK) Ltd v Duro Felguera UK Ltd [2015] EWHC 3352 (TCC)
- Henia Investments Inc v Beck Interiors Ltd [2015] EWHC 2433 (TCC)
- Caledonian Modular Ltd v Mar City Developments Ltd [2015] EWHC 1855 (TCC)
- Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC)
- ISG Construction Ltd v Seevic College [2015] 2 All ER Comm. 545
- University of Brighton v Dovehouse Interiors Ltd [2014] EWHC 940 (TCC)
- R&S Fire & Security Ltd v Fire Defence Plc [2013] EWHC 4222 (Ch)
- Banner Holdings Ltd v Colchester Borough Council [2010] EWHC 139
- Windglass Windows Ltd v Capital Skyline Construction Ltd & Anor [2009] EWHC 2022 (TCC)
- Thomas Vale Construction Plc v Brookside Syston Ltd [2006] EWHC 3637
- Watkin Jones & Son Ltd v Lidl UK GmbH [2002] EWHC 183 (TCC)
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Cases citing this case
11 later cases · 8 positive · 1 neutral · 2 caution
Most senior citing decisions:
- Placefirst Construction Limited v CAR Construction (North East) Limited [2025] EWHC 100 (TCC) followed
- Kyndryl UK Limited v Jaguar Land Rover Limited [2024] EWHC 2329 (TCC) distinguished
- Iluminesia Limited (t/a Alterego Facades) v RFL Facades Limited [2023] EWHC 3122 (TCC) mentioned
- J & B Hopkins Ltd v Trant Engineering Ltd [2020] EWHC 1305 (TCC)
- VVB M&E Group Ltd & Anor v Optilan (UK) Ltd [2020] EWHC 4 (TCC)
- Amey LG Ltd v Aggregate Industries UK Ltd [2019] EWHC 3488 (TCC)
- Swansea Stadium Management Company Ltd v City & County of Swansea & Anor [2019] EWHC 989 (TCC)
- M Davenport Builders Ltd v Greer & Anor [2019] EWHC 318 (TCC)
- Palmer Birch (A Partnership) v Lloyd & Anor [2018] EWHC 2316 (TCC)
- Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2018] EWHC 1577 (TCC)
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