Galliford Try Building Ltd v Estura Ltd (TCC - 27.2.2015) [2105] EWHC 412 (TCC)

The adverse consequences to the employer of failing to serve a payment or pay less notice in respect of a disputed interim payment application where the contract provides that the contractor is entitled to the sum applied for in the absence of such a notice

Technology and Construction Court
27th February 2015

The facts of this case were similar to those in ISG Construction v Seevic College (2014), which was also decided by Edwards-Stuart J. In both cases the employer failed to serve a payment or pay less notice with the result that the adjudicator held that the contractor was entitled to the full amount of the interim payment application in dispute. The employer in the instant case submitted that if the decision in ISG Construction meant that a party (like itself) which failed to give the correct payment or pay less notices could never challenge a palpably wrong interim application in a subsequent adjudication, that would in effect drive a coach and horses through the Construction Act.
Edwards-Stuart J reviewed and reaffirmed his decision in ISG Construction in response to this submission. He stated that the agreement as to the amount stated in a particular interim application (and hence as to the value of the work on the relevant valuation date) could not constitute any agreement as to the value of the work at some other date. Whilst this meant that the employer could not bring a second adjudication to determine the value of the work at the valuation date of the interim application in question (i) It did not mean any more and (ii) There was nothing to prevent the employer challenging the value of the work on the next application, even if he was contending for a lower figure than the (unchallenged) amount stated in the previous application.
Whilst an inadvertent failure to serve a payment notice in respect of an interim payment application usually results in the employer being liable to pay more than it thinks appropriate, the overpayment can be put right in following applications or possibly when the final account is determined. However, in certain cases the usual means of correcting an error in an interim application may not be available, for example in the instant case where (i) The form of contract did not provide for a negative valuation (ii) The extraordinarily high amount of the interim application was almost equal to the anticipated claim in the contractor's final account and (iii) The payment application was in effect one of the last interim applications for payment that was likely to be made with the result that there was no prospect of a series of further interim applications that would enable the employer to correct the position.