The Court of Appeal has recently handed down its decision in the case of Grove Developments Limited v S&T (UK) Limited upholding the decision of the lower court.
The Court of Appeal judge, Sir Rupert Jackson, as he puts it, hacked his way through the dense thicket of legislation and previous decisions in deciding that an employer could run a second ‘true value’ adjudication even in the absence of a valid payment or pay less notice under a JCT Design and Build Contract.
The decision confirms that the question of whether a pay less notice has been issued with the requisite level of specificity under the Housing, Grants Construction and Regeneration Act (“the Act”) is a question of fact and degree in each case. In any event, the construction of such a notice will be approached objectively (ie how a reasonable recipient would have understood the notice). In this case, it was decided that the failure to re-attach previously issued calculations did not invalidate the notice.
Overturning previous authorities, the court decided that even in the absence of a pay less notice, the notified sum is not conclusive as to the correct value of the work done. Adopting a purposive approach, Sir Rupert stated that there is a hierarchy of obligations in the Act, the most important of which is a party’s immediate obligation to pay a notified sum by the final date for payment. His rationale being that the strict time constraints surrounding a pay less notice cannot sensibly lead to a definitive valuation, the mechanism is simply intended to generate a provisional figure for payment.
The Court therefore upheld the lower court’s decision in that:
- It is open to a party that has failed to serve a payment notice and pay less notice to commence an adjudication to have the true value of the payment assessed.
- However, before a valuation dispute can be referred to adjudication in these circumstances, the paying party must actually pay the sum that had become due as a result of the failure to serve a valid payment notice and pay less notice.
Regardless of whether you agree or disagree with this conclusion, the construction industry now has the benefit of a Court of Appeal decision on this point. It may be that this decision goes someway to counter the symptoms of the ‘smash and grab’ adjudication culture; only time will tell. Though, as ever, best practice is to ensure that notices are issued timeously and in accordance with the terms of the contract.