Construction Adjudication Part 3 of 2022

Construction Adjudication Part 3 of 2022

Construction Adjudication Case Law The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 3 of 2022

Kenneth T. Salmon Consultant Solicitor at Slater Heelis

Construction & Engineering

Contents Case 1 : Jurisdiction – same dispute – binding nature of earlier true value award – set-off – joinder of disputes – stay...................................................................................... Bexheat Ltd v Essex Services Group Ltd – EWHC 936 (TCC) O’Farrell J (judgment 19 April 2022)

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Case 2: Natural Justice – adjudicator adopting his own analysis........................................... Van Oord UK Ltd v Dragados UK Ltd [2022] CSOH 30 Lord Braid (judgment 7 April 2022)

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Case 3: Natural Justice – adjudicator deciding issue on basis not advanced.................... Liverpool City Council v Vital Infrastructure Asset Management (Viam) Ltd (In Administration) [2022] EWHC 1235 (TCC) HH Judge Stephen Davies (judgment 24 May 2022)

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Case 4: Pay Less Notice – requirements.......................................................................................... Advance JV v ENISCA Ltd [2022] EWHC 1152 (TCC) Mrs Justice Joanna Smith DBE (judgment 16 May 2022)

Introduction The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 3 of 2022, by Kenneth T. Salmon, Consultant Solicitor, Slater Heelis.

Legislation The Act means the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 Pt 8.

The ‘new’ provisions apply to contracts entered into on or after 1 October 2011. The Act applies to Northern Ireland.

The main regulations are contained in the Scheme for Construction Contracts (England & Wales) Regulations 1998 (the ‘Principal Regulations’)[1] They have been amended by the Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011[2] (the ‘new Regulations’). The new Regulations apply only to contracts for construction operations in England entered into on or after 1 October 2011. For earlier contracts the Principal Regulations apply. Northern Ireland has its own scheme: the Scheme for Construction Contracts in Northern Ireland 1999 as amended by the Scheme for Construction Contracts in Northern Ireland (Amendment) Regulations (Northern Ireland) 2012. The Northern Ireland Scheme is broadly similar to that in force in England and Wales. There are separate regulations for contracts for work in Scotland applicable to contracts made on or after 1 November 2011.[3] The new Regulations apply only to contracts for work in Scotland entered into on or after this date. For earlier contracts the Scheme for Construction Contracts (Scotland) Regulations 1998[4] applies. There are new separate regulations for Wales, applicable to contracts for construction operations in Wales entered into on or after 1 October 2011[5]. A reference to “the Scheme” is to the Principal Regulations for England and Wales, or the Scheme for Scotland, or Northern Ireland, as the context requires.

[1] Scheme for Construction Contracts (England & Wales) Regulations 1998 (SI 1998/649). [2] Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011 (SI 2011/2333). [3] Scheme for Construction Contracts (Scotland) Amendment Regulations 2011 (SI 2011/371). [4] Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998/687) (S.34). [5] Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations 2011 (SI2011/1715) (W.194).

1) Jurisdiction – same dispute – binding nature of earlier true value award – set –off – joinder of disputes – stay – Bexheat Ltd v Essex Services Group Ltd – EWHC 936 (TCC) O’Farrell J. (judgment 19 April 2022)

before Mr Linnett.

ESG raised and the court had to decide each of the following issues.

i ) whether the 'true value' of Interim Application 23 was determined in the First Adjudication, with the result that Mr Silver had no jurisdiction to determine the payment due under Interim Application 23 in the Second Adjudication Decision and/or ESG satisfied its payment obligations in respect of the same; i i) whether ESG had an entitlement under clause 30.2 of the Contract to set off or make deductions against the Second Adjudication award in respect of any amounts which may at any time be due or have become due from BHL to Essex; iii) whether ESG was entitled under clause 30.3 of the Contract to elect to have the 'true value' of the application payment in dispute determined at the same time by the same adjudicator as the 'notified sum' dispute; iv) whether Mr Silver had jurisdiction to award to BHL £100 compensation pursuant to the 1998 Act; if not, whether that part of the award should be severed; v) whether enforcement of any judgment should be stayed, having regard to any risk that any subsequent judgment requiring return of the sum paid would go unsatisfied, or to avoid any manifest injustice.

Background and contentions

These interesting enforcement proceedings raised a number of different issues and a would-be novel point. The dispute arose out of a project for the construction of a residential and extra care facility. ESG was engaged as sub-contractor for the MEP works and in turn engaged BHL as sub-sub- contractor to carry out the plumbing works ("the Contract"). The claimant ("BHL") applied for summary judgment to enforce the adjudication decision of Mr Silver dated 12 November 2021 ("the Second Adjudication"), directing the defendant ("ESG") to pay to BHL £706,029.62 plus interest and the adjudicator's fees. The Second Adjudication resulted from a payment application number 23 against which BHL contended and the adjudicator found there was no valid pay less notice. In the first adjudication between the parties BHL had applied for a true valuation of payment application number 22 and the adjudicator, Mr J Cope, decided that the true value of Interim Application 22 was £1,319,830.61 and BHL was entitled to payment of £141,646.35 plus VAT plus interest and fees ("the First Adjudication"). ESG paid all those sums in full.

The decision

Issue 1: Jurisdiction – same dispute?

The starting point was for the court to consider the scope of the First Adjudication; in particular, whether the dispute or difference the subject of the First Adjudication was the same or substantially the same as the dispute or difference in the Second

There was then a third abortive adjudication

Adjudication.

payment of the First Adjudication Award), Mr Silver did not carry out an examination of the claims, evidence and argument in respect of the true valuation of Interim Application 23. The relief granted by the Second Adjudication Award did not refer to the true valuation of Interim Application 23; it simply decided that BHL was entitled to payment in full by reason of ESG's failure to serve a valid Pay Less Notice. Thus, on analysis, the dispute or difference that was decided by Mr Cope in the First Adjudication was not the same or substantially the same as the dispute or difference decided by Mr Silver in the Second Adjudication.

Looking at the adjudication notice, the First Adjudication concerned the true value of Interim Application 22. In contrast, the dispute referred in the Second Adjudication was whether ESG had served a valid Pay Less Notice in response to Interim Application 23; if not, whether BHL was entitled to payment of the sum claimed as 'the notified sum'. Whilst the figures in each application were substantially the same, they covered different periods and the focus in the Second Adjudication was whether there was a valid Pay Less Notice as opposed to the true value of the application.

Next the court looked at what was actually decided.

That however was not the end of the matter.

The dispute determined by Mr Cope in the First Adjudication was the true value of Interim Application 22. In his decision, he expressly stated as much. He worked through the detailed argument, evidence and figures in respect of the measured works, preliminaries, variations and claims for additional costs but all with the intention of establishing the true value of Interim Application 22. The relief granted by the First Adjudication Award contained a declaration as to the true valuation of Interim Application 22. In contrast, the dispute determined by Mr Silver in the Second Adjudication concerned the validity of what was relied by ESG as the Pay Less Notice in response to Interim Application 23; the key issue was the status of that document sent by ESG on 13 October 2021, one day after publication of the First Adjudication Decision. Although the application in Interim Application 23 for the measured works, preliminaries and variations were identical to the figures in Interim Application 22, (save for certain credits for ESG's

ESG contended that the true value having been determined in the First Adjudication ESG was entitled to rely upon and enforce that true value against Interim Application 23 despite the absence of any payment or Pay Less Notice and that nothing in S&T v Grove prevented that reliance, where, as here, the true value was decided prior to not after the notified sum falling due as a result of failure to serve a Pay Less Notice. The judge said that despite its superficial attraction the argument failed as the true value related to a different application and valuation period. Although it was argued that the true value of Interim Application 23 would not change, that question had not been adjudicated upon. Second regardless of the true value, the defence had not been raised in the Second Adjudication and it was too late to raise it now. It had failed to reserve its position in the Second Adjudication although it done o sin relation to another matter (the non-payment of the adjudicator’s fees in the First Adjudication).

“A difficult task could become impossible if one party could unilaterally require the adjudicator to determine a raft of disputes within one adjudication. There is implicit recognition of this difficulty in clause 30.3 in that it does not compel the adjudicator to determine more than one dispute, even where such election has been made by ESG.” Further in this case section 111 of the Act would preclude ESG from relying on clause 30.3 to refer the 'true value' dispute in respect of Interim Application 23 prior to satisfying its obligation to pay the 'notified sum' as explained in S&T v Grove. Applying the principles to be derived from the case, ESG's exercise of any contractual right under clause 30.3 of the Contract to require the adjudicator to determine the 'true value' dispute together with the 'notified sum' dispute in the same adjudication would have to be subject to compliance with its immediate payment obligation of the 'notified sum'. As ESG failed to comply with its immediate payment obligation in respect of the 'notified sum', it was not entitled to adjudicate on the 'true value' dispute, whether pursuant to clause 30.3 or otherwise.

Applying the principles set out by Coulson LJ in Bresco[6] , following rejection by Mr Silver of the specific jurisdictional objection, ESG was precluded from raising other jurisdictional grounds which might otherwise have been available to it. Thirdly, ESG argument ignored the express provisions of section 111 of the Act. Had ESG wished to rely on the 'true valuation' adjudicated upon in the First Adjudication against any further payment sought in Interim Application 23, it could and should have raised this in a Pay Less Notice. Having failed to do so, the sum claimed in Interim Application 23 became the 'notified sum' due for the purpose of the section.

Issue 2: Right of set-off

ESG relied on an express contractual right of set-off against an adjudicator’s award. The problem with that provision was that it was contrary to section 8 of the Act and clause 30 of the Scheme (which applied here). The court of appeal had held that a right of set-off could not be relied on as defence to enforcement of an adjudicator’s decision[7]. The limited exceptions identified by Akenhead J in Thameside[8] did not apply here. The set-off relied on did not arise out of either of the adjudication decisions. An unqualified right of set-off offended the Act and Scheme and therefore had to be construed consistent with the Act and Scheme or be struck down as unenforceable.

Issue 4: Severance

ESG sought an order that the part of the Second Adjudication Decision in which BHL was awarded £100 compensation pursuant to the Late Payment of Commercial Debts (Interest) Act 1998 be severed on the ground that the adjudicator had no jurisdiction to award this sum. It said that BHL's entitlement to claim compensation under the Act had already been decided (in the negative) in the First Adjudication.

Issue 3: Joinder of disputes

A provision in the Contract allowed the adjudicator to determine more than one dispute at the same time at the option of ESG. That unilateral right of joinder was inconsistent with paragraphs 8 and 20 of the Scheme which allowed multiple disputes with the consent of all parties.

Where part of an adjudication award is held to be unenforceable, the court has power to sever that

As the judge put it:

[6] Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) 2019] EWCA Civ 27 [7] Ferson Contractors Limited v Levolux AT Limited [2003] EWCA Civ 11 [8] Thameside Construction Co Ltd v Stevens [2013] EWHC 2071

that part and enforce the remainder[9].

In this case, the compensation awarded is a fixed sum in respect of a discrete issue and of very modest value in comparison to the remainder of the award. Therefore, it would have been an appropriate case for the court to consider severance. However, as was common ground, ESG had failed to raise this challenge to Mr Silver's jurisdiction in the Second Adjudication, despite raising other such challenges. Therefore, any right to challenge jurisdiction in respect of the compensation issue was waived: Bresco (above).

Summary judgment was granted.

Stay

The alternative application for a stay of execution failed on the grounds that the evidence fell short of showing a probable inability to repay, where BHL was a going concern with no indication of insolvency or improper distributions.

[9] Cantillon Ltd v. Urvasco Ltd [2008] EWHC 282 (TCC) per Akenhead J at [63]; Willow Corp SARL v MTD Contractors Ltd [2019] EWHC 1591 (TCC) per Pepperall J at [68]-[74].

2) Natural Justice – adjudicator adopting his own analysis – Van Oord UK Ltd v Dragados UK Ltd [2022] CSOH 30 Lord Braid (judgment 7 April 2022)

Dragados further complained that had they been denied the opportunity to address this analysis. Had they been given notice, they would have contended that the claim was out of time. Vol’s position was that the adjudicator had adopted an intermediate position which he was entitled to do without having to give the parties notice.

Background and contentions

The law

Dragados, the main contractor for the Aberdeen Harbour Expansion Projec, sub-contracted the dredging works to Van Ooord (VOL) on an NEC form of contract. There were delays and Dragados purported to terminate the sub-contract. In the aftermath there were seven adjudications between the parties. One adjudication resulted in a decision that VOL was entitled to an EOT and prolongation costs for a compensation event that delayed access to open- quay work. VOL sought to enforce that part of the decision that related to its delayed access claim. Dragados said that part of the decision was unenforceable, the adjudicator having reached his decision on a basis not canvassed by either party or their experts, and which they had no chance to address.

An adjudicator should not decide a factual or legal point on a basis not put to it by the parties.

The adjudicator may reach a decision on the material before it, on a basis for which neither party had contended provided the parties were aware of the relevant material and the issues had been fairly canvassed[10]. If the adjudicator proposed to use its own knowledge and experience to advance a proposition of fact or law not argued by the parties, it would usually be appropriate to raise the same with the parties before making a decision[11]. An adjudicator would be afforded ‘considerable leeway and could adopt an intermediate position not advanced by either party, without needing to give notice and opportunity to comment[12]. A breach of the rules of natural justice would need to be material before it would vitiate a decision. It would be material where the adjudicator failed to bring to the attention of the parties a point or issue which they ought to have been given the chance to comment on, or which was either decisive or of considerable importance to the outcome.

The adjudicator had:

Founded his analysis on a baseline programme dated 15 march 2019, which both experts had rejected as starting point, instead using programmes dated October 2018 and April 2019 respectively Calculated the impact of delay from 31 July 2019, a date earlier than the critical date relied on by either expert.

[10] Roe Brickwork Ltd v Wates Construction Ltd; Costain v Strathclyde Builders Ltd 2004 SCLR 707 [11] Miller Construction (UK) Ltd v BDP [2014] SCOH 80 [12] Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Lt

Findings

In adopting the March 2019 programme as his starting point and reaching 31 July 2019 as the critical date, the adjudicator had not only taken a date earlier than either party or its expert contended for, he had arrived at different critical date than either party had put forward. It was not an intermediate approach (such as was adopted in Miller). It might have been arguable that the adjudicator was entitled to take the earlier programme, thus to arrive at the critical date, but if so he should have given notice to the parties if his intention to do so and a chance to comment. It did not matter whether or not the arguments which Dragados said they would then have deployed were arguments that would have succeeded; the point was they were deprived on the opportunity to raise them.

The beach was material and the court declined to enforce the award.

3) Natural Justice – adjudicator deciding issue on basis not advanced – Liverpool City Council v Vital Infrastructure Asset Management (Viam) Ltd (In Administration) [2022] EWHC 1235 (TCC) HH Judge Stephen Davies (judgment 24 May 2022) The claimant Liverpool City Council (LCC) were adjudged liable at adjudication to pay the defendant (Vital) £128,500 for work under a maintenance contract for temporary fencing for highways. The parties entered into a framework agreement under which each work project would be the subject of a separate call-off contract based on NEC3 as amended and supplemented by the provisions of schedule 9 of the framework agreement. A number of issues arose which it was argued by LCC meant the adjudicator had no jurisdiction. The dispute resolution provisions of the framework agreement and call off contract were key to issues (1) and (2) as set out below.

During the hearing the court suggested that the Nullity Issue might more properly be a natural justice issue. That then became: ( 4) Whether the adjudicator had decided the case on a basis not advanced by Vital, the referring party in the adjudication (the Natural Justice Issue).

(1) the Two Contracts Issue and (2) the Notice Issue

The dispute resolution provisions of the framework agreement and call off contract were key to issues (1) and (2) which were dealt with together. The notice of adjudication was sent to the Head of Procurement as specified in cl. 53 of the framework agreement. The ANB in the framework was RIBA yet Vital said it intended to ask ICE to appoint (it being the ANB under NEC3). The inconsistency is apparent. The notice went on to say that the dispute had arisen under both the framework agreement and the call-off contract and identified the dispute resolution procedure as that under both the framework agreement and the call- off contract. The ultimate relief claimed was the payment of money under the call-off contract but the staging posts to that included declarations as to matters under both contracts. In the adjudication and in court LCC claimed the dispute arose under both the framework agreement and the call-off contract and that as the adjudicator could not decide more than one dispute at the same time, he was deprived of jurisdiction.

The issues

(1) Whether there was more than one contract (the Two Contracts Issue)

(2) Whether the notice of adjudication had been properly served in accordance with the framework agreement (the Notice Issue)

The court did not agree for three reasons.

First the dispute resolution provisions agreed expressly contemplated that a dispute might raise questions under both contracts and under such circumstances could be referred under the call-off contract.

(3) Had the adjudicator answered the wrong question (the Nullity Issue)

Second, the various declarations were staging posts on the way to the real issue which was whether Vital was entitled to £129,000 under the call-off contract.

Even if that finding was an error by the adjudicator it was within his jurisdiction and the court would not interfere.

(4) The Natural Justice Issue

Third, the terms of the framework were incorporated into the call-off contract.

LCC now accepted that if the award was to be challenged it could only be on the grounds of a breach of the rules of natural justice. It therefore now contended that not only was it not true that LCC had agreed that there was a typographical error in the SoR that should be amended to read “£2 per metre per day”, the point had never been raised or put to it and it had been deprived of the chance to raise the answer that if this was an error, it could not be simply corrected by reference to the rate in the BQ call-off contract; even if it could be corrected, it could only corrected by applying the NEC defined cost approach as provided for in the NEC3 contract. There was nothing in LCC’s response in the adjudication or in the compensation event notice that amounted to an admission that there was an error in the SoR. The difficulty the adjudicator faced was that Vital did not advance its case in the notice of adjudication or referral on the basis that there was a conflict between the SoR in the framework agreement and the BQ under the call-off contract, with the latter taking precedence. The adjudicator drew this to the parties’ attention and set out three possible ways forward in an email of 20 May including ‘start again’. In the event neither party agreed to any of the options. Unhelpfully Vital rejected the analysis and insisted the adjudicator proceed in accordance with the case advanced in the adjudication.

Linked with this was LCC’s submitted that the notice of adjudication had not been correctly served. The court was glad to find that on a proper construction of all the provisions of both contracts the notice of adjudication was to be given and sent in accordance with the provisions of the framework agreement, noting that it was actually received by LCC and promptly acted upon.

(3) The Nullity Issue

LCC’s complaint was that the adjudicator had failed to answer the questions put in the notice of adjudication or had answered the wrong question. Specifically, he failed to engage with the individual declarations sought and instead assessed the value of work by reference to rates in the Bills of Quantities (BQ) under the call off contract. On examination this narrow point was misconceived. The several issues comprised one dispute as to what sum LCC was obliged to pay. The basis of the decision was clearly set out. He decided there was a compensation event notice by reference to which the parties had agreed there was an error in the schedule of rates (SoR) in the framework agreement. The error was that a rate of “£2 per metre” should have been and meant “£2 per metre per day”. As a result there were then three different SoR rates by which the works might be valued. He opted for £2 per metre per day because he found that had been agreed.

The court clearly had some sympathy with the adjudicator who sought to overcome the difficulty

difficulty in which he was placed by determining that LCC had implicitly if not explicitly conceded that the rate in the SoR was a mistake. However that was not Vital’s case and he did not give LCC fair notice of what he was considering and an opportunity to address it. Nor did he engage with LCC’s case in the response as to the order of precedence clause which prevented a mistake being corrected as alleged by Vital. These were described as “fundamental departures from the obligation to follow a fair procedure” nor had the adjudicator adopted any of the three options he put forward in his email of 20 May. LCC was deprived of the opportunity of arguing these points and was entitled to a declaration that the decision was unenforceable as matter of law. Although he made representations to the court with permission, the adjudicator was not a party to the proceedings and not bound by the decision. The administrators of Vital declined to take part.

Comment

It is fair to mention that the court accepted and stated that the adjudicator has acted from the best of motives in trying to determine the parties’ dispute. That said it is a fundamental requirement that adjudicators give parties notice and an opportunity to address them if they intend to consider taking a course that has not been argued or canvassed, or is based on their own analysis of the provisions of the contract or issues before them.

4) Pay Less Notice – requirements – Advance JV v ENISCA Ltd [2022] EWHC 1152 (TCC) Mrs Justice Joanna Smith DBE (judgment 16 May 2022) This was a part 8 application by Advance for a declaration concerning the validity of its Pay less Notice (PLN) in respect of two payment applications (AFP24 and AFP 25) by ENISCA. An adjudicator decided Advance did not issue a valid PLN against AFP 24 and awarded ENISCA £2.7m. In the court application it was agreed that if Advance was not entitled to the declaration sought, it would pay the adjudicator’s decision in 7 days so that there was no need for ENISCA to apply to enforce the decision. The contract was an NEC3 subcontract with bespoke amendments. It was agreed by the parties and accepted by the court that the payment terms complied with the requirements of the Act. That being the case, the court was concerned with the contractual provisions except in one important respect – the payment cycle. The contract provided for an assessment date by which ENISCA had to make its monthly application for payment; Advance was to issue a payment certificate within 21 days of the assessment date; the due date was 21 days after the assessment date; the final date for payment was 21 days after the due date.

On 22 October 2021 ENISCA submitted AFP24 by email for a gross value of £5,131m (£1.4m more than the previous month). The net payment applied for was £2.717m. No payment certificate (which would have been due by 12 November 2021) was provided by Advance and no document was sent which expressly sought to respond to AFP24. On 19 November 2021, the next assessment date, ENISCA submitted AFP25, in the gross sum of £5.217m (an increase of £85,600 odd over AFP24). On 25 November, one day before the window for giving a PLN in respect of AFP24), and within the certification period for assessment date for AFP25, Advance uploaded to the electronic document system for communications, a package which included a payment certificate for the assessment date of 19 November 2021, i.e. the assessment date referable to AFP25. Attached to it were a spreadsheet detailing the assessment, and advances alternative assessment, a PLN and ENISCA’s own AFP25.

The PLN was headed and clearly identified as such and contained the reference for AFP25.

Advance’s case was that the PLN could be relied on as a valid notice in response to AFP24. That it satisfied the timing and content requirements of the Act and, properly construed, a reasonable recipient would have understood Advance did not intend to make any further payment in respect of AFP25 or AFP24. After setting out the provisions of sections 110, 110A, 110B and 111 of the Act, the court emphasised that there was an overriding obligation to pay the notified sum. This did not preclude a subsequent challenge to the true value by either party, but in the meantime the notified sum was to be paid. The court recognised this could have draconian consequences for party who failed to serve a PLN. But that was the acknowledged effect of the statutory provisions.

Any PLN was to be served no later than 7 days before the final date for payment.

vi) The use of the terms “App25” and “AFP25” clearly pointed to an intention that the PLN was to related to that application. Nothing in the PLN or elsewhere in the package of documents, pointed to it being a response to AFP24. The notice contained Advance’s own assessment of ENISCO’s assessment of valuation at 19 November 2021 i.e. the assessment giving rise to the notified sum at AFP 25. v) vi) The fact the notice was given one day before the final date for payment of AFP24 was a neutral factor. Finally the court rejected the argument that there was justification for viewing the PLN on a “broader level”. The facts did not warrant such an approach. The declaration was refused.

It was ENISCA’ contention that the existence of a payment cycle to create a due date for payment and final date for payment was essential to the operation of the payment mechanism and therefore the ability to serve a valid payment notice or PLN.. The pointed to the case of Bexheat Ltd v Essex Services Ltd[13] in support. The court agreed. It was plain from a review of the payment regime under the Act that payment notices were required to referable to individual payment cycles. An individual PLN had to be referable to the payment notice in which the notified sum against which it was given was identified. Bexheat confirmed that view. Applications 24 and 25 were and were intended to be substantively different, assessed at different dates (22 October and 19 November) and they were for different amounts. Advance had a second string to their bow. There was nothing in the Act or contract to prevent a notice being given against more than one payment application. They contended their PLN against AFP25 could respond to AFP24 as well.

Comment

This case discusses several interesting points. First, it is useful to be reminded that it is the Act and not the Contract which lays down the payment regime. The contract should and usually will identify a means of establishing the payment cycle, from which the due date for payment, final date for payment and last date for giving a PLN can be calculated. (If the contract does not do so then the Act and Scheme will supply what is missing or replace non Act-compliant provisions.) Second, the court found that the PLN in question could not serve to answer two separate payment applications. It remains to be seen whether this is possible in different circumstances and if and when a PLN is so designed and expressed. Third it explores objectively speaking, what a reasonable recipient, in the position of the actual recipient (that is with that party’s knowledge, for example of the contract) would understand the

The court rejected this novel proposition for a number of reasons.

i) The use of the terms “App25” and “AFP25” clearly pointed to an intention that the PLN was to related to that application. Nothing in the PLN or elsewhere in the package of documents, pointed to it being a response to AFP24. The notice contained Advance’s own assessment of ENISCO’s ii) assessment of valuation at 19 November 2021 i.e. the assessment giving rise to the notified sum at AFP 25. The fact the notice was given one day before the final date for payment of AFP24 was a neutral factor. iii)

[13] [2022] EWHC 936

notice to be responding to.

Fourth, whilst all notices are equal, it appears some are more equal than others.

Thus payment notices (whether in the form of an application for payment or a certificate) and PLNs will all be construed using the same rules, and strictly; but because the absence of a valid PLN has the most draconian consequences, there is the possibility, hinted at in the judgment, that it may be afforded a little more leeway.

Construction & Engineering Get in touch with our team for more information:

Matthew Grellier Partner & Head of Construction [email protected] 0161 672 1427 | 07753 464 740

Kenneth Salmon Consultant Solicitor [email protected] 0161 672 1436 | 07786 702 140

@SlaterHeelisLaw /slaterheelis