Kersfield entered into a JCT contract with Bray and Slaughter Ltd to refurbish and convert a mansion house and stable block, plus build some additional houses. Bray issued an interim application for payment as required by the contract but this was not paid and therefore the matter ended up in front of O’Farrell J in the Technology and Construction Court.
O’Farrell J dealt with three main issues: (1) was the payment application issued by Bray valid; (2) was the pay less notice served by Kersfield in response valid; and (3) could Kersfield take the issue to further adjudication.
In relation to the payment application itself, the court held that it was valid on the basis that it had been issued in accordance with the contract and with statute. Kersfield took issue with specific elements of the notice that they felt were not satisfactorily explained in line with the requirements in the contract. O’Farrell J distinguished between a valid application and the validity of the claims contained within an application, a distinction that she felt was key in ensuring certainty of process.
Instead, it was held that Kersfield would have been able to deal with the amount by issuing a pay less notice. Kersfield had in fact done so, however it was emailed to Bray’s agent at 9:50pm on a Friday night. It was agreed in the contract that if a notice was served by email after 4pm, it was deemed served on the next working day, which unfortunately was a day past their deadline. As a result, the court held that the pay less notice was not valid, even though Bray’s agent had in fact seen the email before the deadline. In fact, O’Farrell J mentioned that it was sensible that they had provided for service by email, as this is not dealt with under statute.
Finally, Kersfield argued that they were entitled to take the matter forward to further adjudication for a decision on the amount payable. O’Farrell J disagreed on the basis that the payment application is a default mechanism under the contract that fixes the amount and requires the recipient to pay the “notified sum” unless a pay less notice was served.
This case did not really provide any new law, but the pivotal issue was the pay less notice not being served on time and the courts showed themselves unwilling to allow any attempts to avoid the normal payment mechanisms, teaching us all the importance of ensuring we follow these procedures.
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