Back to Basics #26 - The Importance of Payment and Payless Notices
The Local Democracy, Economic Development and Construction Act 2009 (commonly referred to as the ‘The LDEDC Act’) amended the previous Housing Grants Regeneration and Construction Act 1996 and, amongst other things, introduced the principle of Payless Notices (replacing withholding notices) and the payment of the “Notified Sum”.
Section 110 of the Housing Grants, Regeneration and Construction Act 1996 (Amended by the LDEDC Act 2009) requires the Payer to issue a “Payment Notice” and also introduces the principle of the “Notified Sum” which is the term used to describe the sum Notified by the Payee in the absence of a Payer issued Payment Notice. Section 111 of the HGRC Act 1996 creates an obligation to pay the Notified Sum if a Payless notice is not issued against the “Notified Sum”.
In “S&T (UK) Ltd v Grove Developments Ltd [2018]" the Court of Appeal confirmed that where an Adjudicator has issued a decision ordering payment of a Notified Sum arising under an interim application for payment, that sum must be paid before the Payer can commence a True Value adjudication.
The result of this decision is that if a party succeeds in a “Smash and Grab” adjudication the losing party must pay the award before it can try to recover any over-payment through a True Value claim.
A recent case of "Bexheat Ltd v Essex Services Group Ltd [2022] EWHC 936 (TCC)" has now bolstered the S&T decision.
Bexheat had commenced an adjudication regarding the true value of its interim application 22 and Essex Services (“ESG”) was ordered to pay Bexheat around £140,000.00. ESG complied with the decision.
Less than a week after the decision on interim application 22, Bexheat then commenced a second adjudication seeking payment of a Notified Sum relating to interim application 23, as ESG had failed to serve a valid Payless Notice by the deadline (2 days after the first Adjudicator’s decision). Bexheat was successful and ESG was ordered to pay over £700,000.00.
ESG resisted payment of this second decision and, on enforcement of the second Adjudicator’s decision, ESG argued that the second Adjudicator lacked jurisdiction because the dispute they had been asked to determine was the same, or substantially the same, as that which had already been decided by the first adjudicator i.e. the decision in the second adjudication included in substantial parts sums already decided in the first adjudication.
The Court held that the disputes were not the same, or substantially the same, and the second decision was upheld.
This recent case reinforces (if it was necessary) the criticality of issued timeous Payment and Payless Notices.
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