Placefirst Construction Limited v CAR Construction (North East) Limited

Under the statutory construction payment regime, a payless notice may be served after receipt of a valid interim payment application and before the period for serving a payer’s payment notice has expired. The application may operate as the payee’s notice for this purpose where the contract wording satisfies section 110A(3) of the Housing Grants, Construction and Regeneration Act 1996. Payment notices and payless notices may contain the same valuation and deductions, although one notice cannot operate as both.

Validity is assessed objectively in context. No particular label, statutory reference or contractual clause is required. A separate valuation or payment certificate may constitute a payment notice where its intended contractual function and content are sufficiently clear. A negative sum does not invalidate the notice.

The claims arose from an adjudicator’s decision requiring Placefirst Construction Limited to pay CAR Construction (North East) Limited £867,031.36 plus VAT under an interim payment application. CAR brought Part 7 enforcement proceedings. Placefirst brought a Part 8 claim seeking a final determination that it had served a valid payless notice and, alternatively, a valid payment notice.

The parties’ amended JCT design and build subcontract followed the payment provisions of the Housing Grants, Construction and Regeneration Act 1996. Placefirst sent a payless notice, together with a valuation and subcontract payment certificate, before the date on which a payer’s payment notice had to be served. The central issues were whether the payless notice was invalid because it was premature and whether the accompanying valuation constituted a payment notice.

1. Outcome. Placefirst’s payless notice was valid. The adjudicator’s contrary decision was wrong and was not enforced.
2. Section 111(5)(b) prevents a payless notice from being given before the notice by reference to which the notified sum is determined. The amended subcontract required CAR’s interim payment application to state the sum it considered due at the relevant date and the basis of calculation. That wording complied with section 110A(3), unlike wording referring only to a sum that would become due in the future. The application therefore constituted the relevant payee notice, and the payless notice was not served before it.
3. Alternatively, section 110B applied because the contract required Placefirst to give a payer’s payment notice and CAR’s case was that it had failed to do so. Section 110B(4) treated the advance payment notification as a section 110A(3) notice. Nothing in the statutory language required that notice to be treated as given only when the payer’s notice period expired. The notice took effect by reference to the date on which the interim payment application was actually given.
4. The statutory scheme did not require a payer to wait until the payment-notice period had expired before serving a payless notice. That interpretation was consistent with the statutory purpose of improving cash flow and avoided an unnecessarily narrow time window. The payer could serve a payless notice after receiving the interim application.
5. Although one notice could not operate simultaneously as both a payment notice and a payless notice, both could be served at the same time under cover of the same communication. Applying the objective approach in the authorities, the separate subcontract payment certificate was sufficiently clear to constitute a payment notice. It was described as a valuation, had formal contractual content, identified the relevant dates and amount, and was not merely subsidiary to the payless notice. No particular label or statutory reference was required, and the negative amount did not affect validity.

CAR’s enforcement claim was therefore not enforceable to the extent it relied on the adjudicator’s decision.

Not stated in the judgment.