TONY BINGHAM Is an Arbitrator, Mediator and Barrister. As well as that, Tony is a renowned writer, commentator and lecturer.
Eyes Wide Shut
Those Payment Notices: Pipe Up or Pay Up
Companies have been ignoring applications for payment for decades even though doing so invariably lands them in a whole heap of trouble. The payer screamed that this isn’t the true value of the interim account. Quite probably it isn’t, said the adjudicator, but that’s what is to be paid anyway.
Look up Salcombe Harbour Hotel if you fancy a few days in a top-notch hotel. Rent one of the five-bedroom suites. Galliford Try’s staff have spent umpteen days there - building the place. It is one of those nice size projects at about £8m. That’s where it started. The fuss I will tell you about came when an interim account popped up from Galliford Try at £12.6m. Now then, how did we use to deal with an approach for payment? Well, in decades gone by, we would gawp at the contractor’s account, say damn all and eventually pay a lump of cash we were comfy with. And when the contractor eventually received the cheque with a remittance advice telling him nothing but the bare figures, he would go berserk. Things sort of changed 17 years ago when the Construction Act said the payer was supposed to send a payment notice broadcasting what he said he might pay. But no one bothered to send that notice. Things sort of changed again when the Construction Act underwent a refurb job. Payment notices got a bite - one hellava bite. And somehow the bite has been slow to, well errr, bite. Three recent cases have come trotting along together to tell us about the bite. Go to the third, the Galliford Try case, because it sweeps up the other two: ISG vs Seevic College; and Harding vs Paice. In came the Galliford Try interim application at £12.66m. The developer and hotel owner is called Estura. The contract document is the ordinary JCT family. Perhaps Estura’s folk were away on holiday or asleep or busy; their reaction to the £12.66m application was to say nothing. They get two goes at rejecting the builder’s application. First is to serve a payment notice (with a different, presumably lower sum). The second is to send a later “payless notice” indicating a sort of counterclaim. But nothing like that was used. In which case the application for payment becomes the “notified sum”. It’s a default system. If you don’t pipe up, you have to pay up. And by the way, all contract documents must contain that rule. If not in the document, the