Cash flow is the lifeblood of any construction project, and it often turns on whether a Payment Notice or Pay Less Notice is served on time and in the correct form.
In Vision Construct Limited v Gypcraft Drylining Contractors Limited EWHC 2707, the main contractor, Vision, missed its deadline for serving a Payment Notice and tried to raise three technical arguments to avoid paying an adverse “smash and grab” adjudication. On all counts, the Court said no.
What happened?
Vision engaged Gypcraft under a JCT DBSub/C 2016 standard form subcontract with a bespoke payment schedule detailing the process and timescales of the payment arrangement between the parties. On 16 January 2023, Gypcraft submitted its Application for Payment 23. Vision responded by issuing a Payment Notice, five days late, stating that less than half the claimed payment was due. Vision didn’t issue a separate Pay Less Notice.
Gypcraft commenced a “smash and grab” adjudication. The Adjudicator ruled that Vision’s late Payment Notice was invalid, so Gypcraft’s full application for payment became the notified sum. Vision then brought Part 8 proceedings to try and resist the Adjudicator’s decision.
What did the Court decide?
The Court dismissed all three of Vision’s arguments and enforced the Adjudicator’s decision.
- On a commercial common-sense reading, the payment regime timetable was clear and workable, despite certain steps having a different label to standard JCT language. Since both parties had operated it without difficulty on previous payment cycles, Vision couldn’t claim it was defective now.
- Just because the parties had been lax about deadlines in the past, didn’t mean they had given up their rights to enforce Payment Notice deadlines. Fact-heavy estoppel defences are unsuitable for Part 8 determination in any event.
- The Judge refused to treat the late Payment Notice as a Pay Less Notice. The document was clearly labelled and presented as a Payment Notice throughout, and recharacterising it after the event would be “entirely artificial” and undermine the statutory regime.
What can we learn?
Deadlines are absolute: miss them and you may have to pay the full application amount. Courts will not re-engineer a clear contractual timetable – or relabel a document that clearly says it is a “Payment Notice” – simply because one party faces an adverse “smash and grab” outcome.
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This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.
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