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Can you dispute true value,
before you’ve paid?

Can you dispute true value, before you’ve paid?

May 2, 2019

Do you remember the directions of Sir Rupert Jackson in November 2018, in S & T (UK) Limited v Grove Developments Limited?  If not, you may wish to read my comment on them here.  Sir Jackson said that payment cannot be delayed beyond the final date for payment, whilst the true value is argued about; and the payer cannot embark upon a challenge to the amount due, until he has paid the notified sum or lesser sum of his pay less notice.  In January 2019, that direction came under review.

In Davenport Builders Limited v Mr and Mrs Greer [2019] EWHC 318 (TCC), the parties had contracted by way of acceptance of the builder’s quotation.  The quotation did not contain any provisions about payment which were compliant with the Housing Grants Construction and Regeneration Act 1996.  Therefore, the Scheme applied in full, such that the due date for payment was fixed by the making of a claim for payment by the builder.

Having completed the works, the builder duly issued its claim for payment.  Mr and Mrs Greer did not issue a payment notice, and so the builder issued a default notice.  Mr and Mrs Greer also failed to issue a Pay Less Notice and did not pay the notified sum (fixed by the default notice) by the final date for payment.  The builder obtained an Adjudicator’s award, which ordered Mr and Mrs Greer to pay.  They did not.

Instead, Mr and Mrs Greer raise a “true value” Adjudication.  It determined that no sum was due.

The builder raised an action to enforce the first adjudicator’s award and Mr and Mrs Greer defended this on that basis that, according to the second adjudicator, in truth, no sum was due.  However, in S & T, Sir Jackson had said that before a true value adjudication could be raised, payment had to have been made.  Therefore, the court in Davenport Builders had to decide if the second adjudication was valid.

Mr Justice Stuart-Smith underlined the policy first clarified by Sir Jackson in Adam Architecture Limited v Halsbury Homes Limited [2017] EWCA Civ. 1735: there is no difference in policy to the operation of the payment provisions of the Act between interim payments and final payments.  In Galliford Try Limited v Estura Limited [2015] EWHC 412 (TCC) Mr Justice Edwards-Stuart had suggested that there was a “fundamental difference” between interim payment obligations and final payment obligations; and that was echoed by Sir Jackson in Matthew Harding v Gary Paice and Kim Springall [2015] EWCA Civ. 1231 to confirm that one could still challenge the true value of the work, absent of a Pay Less Notice, provided the notified sum was paid.

Mr Justice Stuart-Smith deliberated the nuances of the decision in Harding.  He identified that it did not decide upon the point in time at which payment of the notified sum had to be made, in order to give validity to the challenge about true value.  Therefore, there had been no decision on whether a party could defend enforcement of payment of the notified sum, on the basis that a lesser true value had since been determined.

The court held that as a matter of policy a party should not be permitted to avoid payment of the notified sum by relying upon a later decision about the true value.  He had to pay the notified sum and then bring proceedings to seek reimbursement of any over-payment against the determined true value.

Turning to re-iterate decision in S & T (the subject of which was an interim payment), Mr Justice Stuart-Smith concluded:

“…it should now be taken as established that an employer who is subject to an immediate obligation to discharge the order of an adjudicator based upon the failure of the employer to serve either a Payment Notice or a Pay Less Notice must discharge that immediate obligation before he will be entitled to rely upon a subsequent decision in a true value adjudication.  Both policy and authority support this conclusion and that it should apply equally to interim and final payments.” 

 So the message is simple: If you fail to issue a valid and effective Pay Less Notice on time, you must pay up.



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