On 24 January 2025, HHJ Davies, sitting as a Judge of the High Court in the Business and Property Courts in Manchester handed down judgement, remotely, in Placefirst Construction Limited v CAR Construction (North East) Limited [2025] EWHC 100 (TCC).
The judgement related to two claims arising out of an earlier decision made by an Adjudicator.
On or about 18 October 2024, the Adjudicator had determined that the sum of £867,031.36 plus VAT was due from Placefirst to CAR under an interim payment application issued by CAR and that Placefirst had failed to serve a Payment Notice of a valid Pay Less Notice.
Following the Adjudicator’s decision, CAR issue Part 7 proceedings seeking summary judgement for the value of the sum determined by the Adjudicator and Placefirst issued Part 8 proceedings seeking a determination that it had in fact served a valid payment notice and/or an effective payless notice.
HHJ Davies determined to reverse the Adjudicator’s decision in a judgement that is essential reading for Employers, Contractors, Contract Administrators and construction lawyers.
The Judgement included, among other things, a detailed analysis of the legal requirements for a valid Payment Notice, including key provisions of the Housing Grants, Construction and Regeneration Act 1996 (‘the Act’) and leading judgements, which is the focus of the remainder of this article.
The Act includes the following key provisions in relation to Payment Notices:
“s.110A
(1)A construction contract shall, in relation to every payment provided for by the contract—
…
(b)require the payee to give a notice complying with subsection (3) to the payer or a specified person not later than five days after the payment due date.
…
(3)A notice complies with this subsection if it specifies—
(a)the sum that the payee considers to be or to have been due at the payment due date in respect of the payment, and
(b)the basis on which that sum is calculated.
…
(5)If or to the extent that a contract does not comply with subsection (1), the relevant provisions of the Scheme for Construction Contracts apply.
…
s.111
(1) Subject as follows, where a payment is provided for by a construction contract, the payer must pay the notified sum (to the extent not already paid) on or before the final date for payment.”
In a recent Adjudication, determined in April 2025, Paul O’Donnell and Mark Culbert represented an Employer, as Responding Party, in a dispute brought under the terms of a RIBA Standard Professional Services Contract 2020 (‘the Contract’).
The crux of the Adjudication concerned whether a simple invoice could constitute a Payment Notice.
On behalf of the Employer, iLaw contended that the simple invoice was not a valid Payment Notice because it did not comply with the statutory or contractual requirements for a Payment Notice.
The key contractual provisions contained within the Contract and relied on by the Employer included:
“Notified Sum: the sum set out in a Payment Notice or in a default notice.
…
Payment Notice: a notice that the Architect/Consultant issues to the Client, in accordance with clauses 5.10 to 5.15, showing the payment that the Architect/Consultant considers is due and how it was calculated.
…
5.12 Each Payment Notice shall comprise the Architect/Consultant’s account, setting out any accrued instalments of the fee and other amounts due, less any amounts previously paid, and stating the basis of calculation of the amount specified, which shall be the Notified Sum. The payment due date shall be the date of the Architect/Consultant’s Payment Notice. Instalments of fees shall be calculated on the Architect/Consultant’s reasonable estimate of the percentage of completion of the Services or stages or other services or any other specified method.”
In addition, the guidance notes to the Contract, provided:
“To ensure that the Architect/Consultant’s accounts issued to the Client are effective as Payment Notices as set out in clause 5.12, each invoice issued by the Architect/Consultant should incorporate the following wording: This is the amount due in respect of the Services provided, calculated as set out in this account and in accordance with the Fees and Expenses agreed in our Professional Services Contract dated [insert date of Contract]. This invoice constitutes a Payment Notice complying with section 110A(3) of the Housing Grants, Construction and Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act2009. The payment due date is the date of this Payment Notice.”
The Adjudicator determined that the simple invoice issued by the Contractor did not meet the mandatory statutory or contractual requirements, that the simple invoice did not constitute a valid Payment Notice, that the Contractor had no entitlement to the sum stated as due and that there was no requirement for the Employer to serve a Pay Less Notice.
The question whether a simple invoice constitutes a Payment Notice is one well-worn within the construction industry.
While the answer is outwardly simple: no, unless it complies with applicable statutory and contractual provisions, the practical application is often much more complex.
The importance of seeking out and securing expert legal assistance to navigate the statutory and contractual complexities welded to this outwardly simple issue is evident from HHJ Davies’ reversal of the Adjudicator’s decision in Placefirst and iLaw’s recent successful Adjudication.
If you are an Employer, Contractor, Contract Administrator or Architect engaged in a dispute in relation to Payment Notices or Pay Less Notices, or any other construction related issue, we can help. Our experts can assist in the process of drafting contracts and can guide you through any disputes arising thereunder, whether in the forum of Adjudication, Arbitration or Litigation.
We recognise that every case is unique. We strive to offer pragmatic, strategic and creative legal solutions and to maximise outcomes for our clients.
If you require assistance and are interested in finding out how we can help, please contact our construction disputes lawyers on paul.odonnell@ilaw.co.uk or 07521 417579.
