The claimant, Kersfield Developments, and the defendant, Bray and Slaughter, entered into an amended JCT Design and Build Contract (2011 edition). The contract provided that the defendant received monthly interim payments, due on the fifth of each month. 

The defendant issued interim payment application No. 19 (‘IA 19’), the claimant subsequently failed to pay it by the deadline and the defendant commenced adjudication proceedings in respect of the unpaid sum, in which he successfully argued that he was entitled to payment in full on the basis that the claimant had not served a valid payment or pay less notice in respect of the works which comprised IA 19. The claimant refused to comply with the adjudicator’s decision and issued Part 8 proceedings seeking a declaration that it was entitled to launch a second adjudication in order to independently value the works comprising IA 19. In response, the defendant sought summary judgment to enforce the adjudicator’s decision.

O’Farrell J rejected the claimant’s argument that there should have been a stay and that IA 19 was invalid because it contained items that lacked substantiation. The Judge held that the information supplied by the defendant when making the application complied with the requirements of clause 4.8 of the contract and the application was clearly intended as an interim application for payment.

O’Farrell J stated that parties were free to agree the form, content and substantiation of payment applications provided they comply with statutory requirements. The Judge restated the principle that an application for interim payment must have been sufficiently clear and unambiguous in form, substance and intent and reminded about the requirement to comply with the Housing Grants, Construction and Regeneration Act 1996.

O’Farrell J went on to say that a deficiency in the substantiation of a payment application might justify rejection of such application in party or in full, but that deficiency would not of itself render the application invalid. Furthermore, the Judge found that the manner of service (email) and deemed date of service (next business day if sent after 4.00pm) provided certainty as to the date that notice would take effect and that such provision was “reasonable and sensible”.

Interestingly, given that interim payment application No. 19 was held to be valid, the court did not have to determine whether there was estoppel by convention. However, obiter, the O’Farrell J held that the parties’ course of dealing in relation to applications for payment did not give rise to an estoppel by convention. The mere fact that payment had been made against earlier applications did not mean the contractor had a contractual entitlement to further payment against an invalid application.

This case served a useful clarification of the consequences of failing to serve a valid payment notice or pay less notice and the courts’ reluctance to disturb a contractor’s entitlement to payment in the absence of any payment or pay less notice issued by its employer. Also, this case confirmed the courts’ orthodox approach to enforcing adjudication decisions and the exceptional circumstances such as procedural unfairness could disturb those findings. And finally, it should be noted that this case related to a JCT Design and Build Contracts, and most of the cases in recent times decided by the TCC have involved this suite of standard form agreements.  It may be the case that other forms of standard contract, or indeed bespoke construction agreements, would be decided differently in respect of some aspects of the issues in this case.