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Payment Applications – “getting your ducks in a row”

Getting payment notices correct should be the corner stone for any project, however we at Pyments frequently see, and advise on, disputes resulting from poor, late and insufficient payment notices. Despite the Construction Act payment provisions being amended over a decade ago, we are still receiving instructions in connection with such issues.

Recently, we acted as party representative on a “smash and grab” adjudication where we successfully defended a potential windfall payment to the payee on the grounds that the relevant payment application had been invalidly submitted (i.e., out of time). As the application was deemed invalid, a lack of payment notice in respect of same was not considered a breach.

Whilst the timing of such notices should be etched into everyone’s mind set, other important factors are sometimes overlooked.

RGB Plastering Ltd v Tawe Drylining and Plastering Ltd [2020] EWHC 3028 (TCC) emphasises the importance of getting all aspects of the notice right.

The Subcontract in this case, provided a payment schedule with dates for each payment cycle. In addition, any applications were to be valued up to a specific date, and if late, were not to be considered. Further, and of significance, the applications were to be submitted electronically to a specific e-mail address.

Tawe issued an application (titled “Valuation Number 6”). RGB did not pay the sum applied for and undertook its own value of the Sub-Contract Works following termination of the Sub-Contract.

Failing to respond to a valid payment notice within the prescribed timescales affords a payee opportunity to commence a “smash and grab” adjudication. Following a successful “smash and grab” adjudication by Tawe, RGB sought a declaration from the court regarding the validity of Tawe’s payment application under the terms of the Sub-Contract.

The Judge found Tawe’s payment application was invalid, concluding “…the application did not comply with the requirements of the subcontract. It was not clear or unambiguous so that the parties could know what to do about it or when. In my judgment it is invalid”.

In essence, Tawe’s application failed on three key points, namely; it was late, it did not value works to a specified date, and was not issued to the address as stipulated within the Sub-Contract. As it did not comply with the Sub-Contract payment provisions Tawe were unable to rely upon its payment application.

This case therefore highlights the importance of getting it right, it is vital all notice provisions, no matter what, but especially with regards to payment (including requirements for applications for payment), should be followed to the letter.  In respect of applications for payment, and as Tawe found out to their detriment, failure to comply with these requirements can invalidate an application and may result in the payer rejecting applications on technical grounds of non-compliance, and/or the application not being considered in its entirety with little recourse for the payee.

Should you require more detailed advice, please don’t hesitate to contact Stuart Neville, Director on Tel: 07966 287 130


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