Rogers & Norton News
Peter Hastings and his team have notched up another success, this time in an Adjudication for a contractor regarding unpaid works.
Peter comments: “The draft final account had not been agreed, but the Employer had not issued a Pay Less Notice. It was suggested that an agreement had been made but although discussions took place, no final agreement had been reached. It was alleged that the sum claimed in the Payment Application was too high because it did not take into account alleged defective works.
The employer failed to provide a Payment Notice pursuant to clause 4.10.2 of the JCT Conditions and also failed to serve a Pay Less Notice pursuant to clause 4.10.5 of the JCT Conditions. As Edwards-Stuart J said in ISG Construction Limited v. Seevic College,
“The contractor’s only entitlement to payment during the course of the project is by way of an interim application. Absent fraud, in the absence of a payment or pay less notice issued in time by the employer, the contractor becomes entitled to the amount stated in the interim application irrespective of the true value of the work actually carried out. The employer can defend itself by serving the notices provided for by the contractual provisions.”
The Employer should have served a Pay Less Notice in accordance with clause 4.10.8 of the Contract. That Pay Less Notice would have had to specify both the sum that it considers to be due to at the date the notice is given and the basis on which that sum has been calculate as required by that clause of the Contract. The Courts have been very clear that a valid Pay Less Notice must be served in good time. The same sort of situation arose in the case of Rupert Morgan Building Services (LLC) Limited v. Jervis, which was decided by the Court of Appeal in 2003.
Accordingly, it was not open to the Employer to seek to reduce the sum claimed in the Payment Application, whether as a deduction for alleged defective and/or snagging work and/or by way of reduction and/or set-off or otherwise.”
If an Employer wishes to challenge the sum claimed, a Payment Notice or Pay Less Notice must be served on time and set out the reasons for disputing the sum.
There have been several stories in the local press of late concerning disputes between builders and their clients – both for poor workmanship and unfinished projects. If you intend to pay a company, what to you is a sizeable some of money, it is essential that you understand the contract terms and especially payment terms before entering into a construction contract, and then adhere to them. It has also been publicised on the BBC that few of us actually read and understand the contracts we sign, making the need for a knowledgeable, experienced expert of paramount importance.
If you need any help or advice please contact Peter at firstname.lastname@example.org or 01603 675639.