Construction law: Payment Notices and a ‘genuine belief’ in the sums due

Tuesday 12th October 2021

A recent TCC case has considered what is required for a valid Payment Notice and also addressed two other notable points on the severability of an adjudicator’s decision and set-off.

The headline points are:

  1. Genuine belief in sums due – a Payment Notice must state the sums an Employer genuinely considers due together with the basis for the calculation of that figure.
  2. Set-Off – an Adjudicator has jurisdiction to consider any defence which would entitle a party to avoid or reduce its liability to pay a sum said by the other side to be due.
  3. Severability of a Decision – an Adjudicator’s Decision can only be severed where it would not create an artificial division of a continuous chain of reasoning.

Point 1 of this judgment in particular has potentially important practical impact. Employers and Main Contractors must be organised in preparing the Payment Notice in good time in order to support their figure with calculations. Otherwise, there is a risk that a last minute “guesstimation” without the backing of full calculations will render the whole Payment Notice invalid.

It will be interesting to see how strictly this will be applied, as the court’s main focus was preventing plainly inaccurate Payment Notice’s for a nominal sum (i.e. £1.00) being given as a placeholder exercise only to give way to the “real” payment notice after the deadline had passed.

A copy of the judgment can be found here.

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