Court of Appeal Guidance on Use of Pay Less Notices

When a construction dispute arises and a pay less notice is issued, the Housing Grants, Construction and Regeneration Act 1996 requires that the notice should specify the sum considered to be due and the basis on which that sum is calculated.

In a recent dispute involving a contractor (called the employer in these types of proceedings) and a subcontractor, the latter argued that the pay less notice was invalid (and so the required payment would be the whole of the amount invoiced) because the sum said to be due, which the contractor considered to be nil, was not properly calculated.

In this instance the contractor had sent a spreadsheet attached to the relevant pay less notice, but when the matter went to adjudication, the adjudicator held that the attachment of the spreadsheet was insufficient to meet the contractual requirement.

When the adjudicator's decision was challenged in court, Mr Justice Coulson concluded that a reasonable recipient of the notice would have understood it and it was therefore valid.

The case also dealt with what the position would be had the pay less notice been ruled invalid. Would the employer be entitled to bring a separate adjudication in order to determine the value of an interim application for payment? The Court of Appeal found that in some circumstances it would.