EWJ 60 April 2025 web - Journal - Page 92
Payment Notices and Adjudication A New Way to Pay Less and/or
Challenge an Adjudicator’s Decision?
Placefirst Construction Ltd v Car Construction (North East) Ltd [2025] EWHC 100 (TCC)
(24 January 2025)
In the recent case of Placefirst Construction Ltd v Car
Construction (North East) Ltd [2025] EWHC 100 (TCC)
(24 January 2025)1 the court was asked to enforce an
adjudicator’s decision (made on a smash and grab
basis) and at the same time, make a final decision, in
part 8 proceedings, on the substantive dispute. The
substantive dispute was regarding the validity or otherwise of the claimant’s payment and payless notices.
Here the court decided the adjudicators decision was
wrong (although emphasised that the case before the
court was “not necessarily the same” as the case before the
adjudicator) and did not enforce the adjudication
award. This may seem an unusual result in the
context of the court’s usual position of ‘pay now and
argue later’, yet this remains consistent with the court's
general principles and previous authorities.
Enforcement and Part 8 proceedings
Following the adjudicator’s decision CAR sought to
enforce the award and issued Part 7 enforcement proceedings on 8 November 2024. However, three days
earlier, Placefirst had issued a Part 8 claim seeking determination on the validity of notices arguing that it
had served a valid payment notice and/or an effective
payless notice, so that it would be unconscionable to
enforce the decision. No other defences to CAR's enforcement claim were raised.
CAR objected to the Part 8 claim being determined by
the court in advance of or at the same time as enforcement of the adjudication award on the basis that
it was wrong in principle not to enforce the adjudicator's decision by reason of the outstanding Part 8
claim, and on the further basis that the Part 8 claim
required the determination of potentially disputed
factual evidence.
Background
Placefirst Construction Ltd (“Placefirst”) was the main
contractor who engaged Car Construction (North
East) Ltd (“CAR”) as a sub-contractor on a construction project at Ridding Road, Esh Winning, Durham.
During a case management hearing on 13 December,
it was decided the Part 8 claim could be determined
alongside the Part 7 enforcement proceedings without delaying the resolution of the enforcement proceedings as there was no reason in principle why it
should not do so.2 The judge went on to say it would
be “unconscionable to enforce the adjudicator's decision” if Placefirst was correct in its analysis of the
notices.3
The parties entered into a subcontract on 26 October
2022 under a JCT design and build 2016 form of subcontract as modified by a schedule of amendments
(the “Subcontract”). Whilst the Subcontract terms
were amended, they substantially followed the payment provisions found within the Housing Grants,
Construction and Regeneration Act 1996 (as
amended) (the “Act").
The decision
The two issues to be decided were:4
• Was Placefirst’s payless notice invalid because it was
served earlier than when required under the Act and
the Subcontract?
CAR submitted its interim payment application via
email on 24 July 2024. Placefirst responded on 31 July
2024 via email with the subject: “CAR Construction Payless Notice and Valuation 30”. This email was accompanied with attachments titled "Valuation 30 - Payless
Notice.pdf" and "Valuation 3O.xlsm". These provided a
breakdown and summary of the sum considered due
by Placefirst (minus £22,000). Notably, one of the tabs
within the spreadsheet was titled “payment certificate”.
• Did Placefirst serve a payment notice in accordance
with the Act and the Subcontract?
The Payless Notice:
The judgment focused on the validity of the payless
notice first because if the payless notice was valid, then
there was no need for the email to also have constituted a valid payment notice. CAR's case was that
Placefirst's payless notice was invalid because it was
served before the date when it could validly have been
served under the Act and/or the Subcontract. Sections111(2)(b) and (c) of the Act set out that the payless notice may not be given before the payment notice
by reference to which the notified sum is determined.
Furthermore, the Subcontract specified that “it may
not be given before the notice by reference to which
the notified sum is determined".5
The adjudication
CAR argued the email sent by Placefirst was a) not a
payment notice, as it was not titled as such, and/or b)
not an effective payless notice as it was sent ‘too early’,
i.e. prior to receipt of a valid payment notice by Placefirst and/or before CAR’s payment application became
the default payment notice. Therefore, CAR was entitled to be paid the full value of its payment application. CAR commenced adjudication to decide the
dispute. The adjudicator agreed with CAR and
awarded CAR £867,031.36 plus VAT.
EXPERT WITNESS JOURNAL
90
APRIL 2025
