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HGCRA 1996 Payment Provisions-Key Cases
HGCRA 1996 Payment Provisions-Key Cases
This Practice Note lists key cases concerning the construction contract payment provisions of the Housing
Grants, Construction and Regeneration Act 1996 (HGCRA 1996) as amended by the Local Democracy,
Economic Development and Construction Act 2009.
For further guidance, see Practice Notes: Payment in construction contracts under the HGCRA 1996 and
Summary of payment provisions in the HGCRA 1996. In relation to interim payments, see also Practice Note:
Interim payments in construction contracts.
CAUTION: From December 2014 (when judgment was handed down in ISG v Seevic) up until February
2018 (when judgment was handed down by the Technology and Construction Court (TCC) in Grove v S&T),
payment cases proceeded on the basis that, where a paying party failed to give a payment or pay less notice
in relation to an interim payment, it was deemed to have agreed to the amount stated in the payee’s payment
application/default payment notice. Accordingly, in relation to the relevant interim payment, the paying party
could not then challenge the ‘true value’ of the works in adjudication (or otherwise). Following Grove v S&T,
which has since been confirmed on appeal, this is no longer good law.
References:
ISG Construction v Seevic College [2014] EWHC 4007 (TCC), 157 ConLR 107
Grove Developments Ltd v S&T (UK) Ltd [2018] EWHC 123 (TCC), 177 ConLR 30
S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448, 181 ConLR 66
Cases relating to pay less notices may also be relevant to payees’ payment applications/payment notices,
and vice versa. In Grove v S&T, the TCC did not think that the courts should generally adopt a different
approach to the construction of the two different kinds of notices, but did note that the particularly adverse
consequences for a paying party that follow from a payee's unanswered payment application/payment notice
would be relevant to the test of the reasonable recipient.
References:
Grove Developments Ltd v S&T (UK) Ltd [2018] EWHC 123 (TCC), 177 ConLR 30 at para [27]
2019
Everwarm v BN Rendering
Topic: Corrective payment clauses
Date of judgment: 18 November 2019
Decision: The TCC held that a term in a sub-contract entitling the main contractor to carry out its own
assessments of the value of the works and recover any overpayments from the sub-contractor did not offend
the HGCRA 1996 nor was it unenforceable by reason of UCTA 1977. However, certain terms concerning the
timing and carrying out of the assessments were implied, as were provisions of the Scheme for Construction
Contracts in relation to notices.
Comment: A particular benefit for the paying party of including such a provision is that, if it fails to give a
valid payment notice or pay less notice in respect of an interim payment, it is able to recover any
overpayment made without having to wait for the final account process or commence a ‘true value’
adjudication.
See News Analysis: Court upholds corrective payment clause (Everwarm v BN Rendering).
References:
Everwarm Ltd v BN Rendering Ltd [2019] EWHC 3060 (TCC), 187 ConLR 240
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References:
C Spencer Ltd v MW High Tech Projects UK Ltd [2019] EWHC 2547 (TCC), 186 ConLR 117
M Davenport v Greer
Topic: Adjudication as to true value of the works
Date of judgment: 20 February 2019
Decision: The TCC held that an employer was prohibited from using a ‘true value’ adjudication decision as a
defence or set-off to enforcement proceedings for an earlier adjudication decision in favour of the contractor
(regarding a lack of pay less notice in response to the final account application). This was because the
employer had not made payment of the earlier adjudication award before commencing its true value
adjudication.
Comment: This case follows in the footsteps of the Court of Appeal’s decision in S&T v Grove.
See News Analysis: Employer could not rely on true value adjudication (M Davenport v Greer).
References:
M Davenport Builders Ltd v Greer & another [2019] EWHC 318 (TCC)
2018
S&T v Grove
Topic: Adjudication as to true value of works/pay less notices
Date of judgment: 7 November 2018
Decision: The Court of Appeal upheld the decision of the TCC, confirming that an employer was able to
challenge, by way of further adjudication, the amount due to a contractor in respect of an interim application,
by reference to the true value of the works—even if the employer had not given a valid payment notice or pay
less notice. However, the Court of Appeal confirmed that it can only do this if it has paid the ‘notified sum’.
The court also upheld the TCC’s findings that a pay less notice was valid, even though it specified the basis
of calculation by reference to an earlier document.
Comment: The ruling confirms that, where a paying party fails to give a valid payment or pay less notice, it is
required to pay the amount in the payee’s application (ie the ‘notified sum’), but if (and only if) it has paid this
amount, it is then able to refer a dispute to adjudication as to the true value of the works.
See News Analysis: Court of Appeal confirms right to adjudicate true value of the works in absence of
payment/pay less notice (S&T v Grove Developments).
References:
S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448, 181 ConLR 66
References:
Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2018] EWHC 1577 (TCC), 178 ConLR 89
References:
Re A Company (No 008654 of 2017) [2018] EWHC 1143 (Ch), [2018] All ER (D) 111 (May)
Grove v S&T
Topic: Adjudication as to true value of works/pay less notices
Date of judgment: 27 February 2018
Decision: The TCC held that an employer was able to challenge by way of further adjudication the amount
due to a contractor in respect of an interim application, by reference to the true value of the works—even if
the employer had not given a valid payment or pay less notice. In the court’s view, this conclusion was
supported by first principles and Court of Appeal authorities, and it described analysis in the earlier TCC
decisions of ISG v Seevic and Galliford Try v Estura as ‘erroneous and/or incomplete’. The court also held
that a pay less notice was valid even though it specified the basis of calculation by reference to an earlier
document.
Comment: The decision has since been upheld by the Court of Appeal (see above).
See News Analyses: Failure to give a payment or pay less notice—a change of approach (Grove
Developments v S&T) and Uncertainties after Grove v S&T.
References:
Grove Developments Ltd v S&T (UK) Ltd [2018] EWHC 123 (TCC), 177 ConLR 30
2017
Adam Architecture v Halsbury Homes
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References:
Adam Architecture Ltd v Halsbury Homes Ltd [2017] EWCA Civ 1735, 175 ConLR 1
References:
Muir Construction Ltd v Kapital Residential Ltd [2017] CSOH 132
Kersfield v Bray
Topic: Payment applications (default payment notices)
Date of judgment: 18 January 2017
Decision: The TCC held that a lack of substantiation did not affect the validity of an interim payment
application, that the contractor remained entitled to the amount in its payment application even though in
correspondence it had sought payment of the sum acknowledged as due by the employer, and that deemed
date of delivery provisions in the contract were not incompatible with the payment provisions of the HGCRA
1996.
Comment: To be valid, a payment application must set out the amount claimed and the basis on which it is
due. Provided these criteria are met, a failure to provide sufficient substantiation of the amounts claimed will
not affect the validity of the application (unless the contract expressly states that it will).
See News Analysis: Interim payment—substantiation requirements and deemed delivery provisions
(Kersfield v Bray).
References:
Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd [2017] EWHC 15 (TCC), 170 ConLR 40
Trilogy v Windsor
Topic: Default payment notices
Date of judgment: 17 January 2017
Decision: The Scottish Sheriff Appeal Court held that a letter from a contractor’s solicitor to its employer,
attaching an invoice sent previously by the contractor, amounted to a valid default payment notice. It rejected
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the employer’s argument that it had been necessary for the contractor to demonstrate its intention to give
such a notice—the court thought that the contractor’s intention was clear from the factual context.
CAUTION: The outcome of this case on its facts is surprising, as the contractor's intention appeared to be to
chase an unpaid invoice rather than give a payment notice. It remains to be seen whether it would be
followed by an English court in similar circumstances.
See News Analysis: Letter from solicitor was valid default payment notice (Trilogy v Windsor).
References:
Trilogy Services Scotland Limited v Windsor Residential [2017] SAC (Civ) 2
References:
Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd [2017] EWHC 17 (TCC),
170 ConLR 65
2016
Universal Piling & Construction v VG Clements
Topic: Payment applications (default payment notices)
Date of judgment: 1 November 2016
Decision: The TCC found that, under the NEC short form contract, there was an obligation on the sub-
contractor to assess the amounts due and issue an application for payment by each assessment date.
Comment: A payee is unable to ‘lock in’ an amount due to it (following the paying party’s failure to give the
required notices) by declining to make any further payment applications if doing so would put it in breach of
its contractual obligations.
See News Analysis: Multiple adjudication decisions and the NEC short form contract (Universal Piling &
Construction v VG Clements).
References:
Universal Piling & Construction v VG Clements [2016] EWHC 3321 (TCC)
Cosmur v St Lewis
Topic: Winding-up proceedings
Date of judgment: 27 October 2016
Decision: The Companies Court granted an injunction to restrain the presentation of a winding-up petition
following a statutory demand for the amount in a sub-contractor’s final account, where the contractor had not
given a pay less notice in time. There was a real question over whether the sub-contractor was entitled to
serve its final account (and also whether an earlier interim payment application had been made at the correct
time).
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Comment: An injunction to restrain a winding-up petition will likely be granted if there is uncertainty around
whether the payment application was valid. Even if the payment application is valid and the paying party has
failed to give a pay less notice, an injunction may nonetheless be granted where the paying party has a
genuine cross claim that exceeds the amount of the debt.
See News Analysis: Injunction to restrain winding up petition for non-payment (Cosmur v St Lewis).
References:
Cosmur Construction (London) Ltd v St Lewis Design Ltd [2016] EWHC 2678 (Ch), [2016] All ER (D) 64
(Nov)
Kilker v Purton
Topic: Final payments/adjudication as to true value of the works
Date of judgment: 14 October 2016
Decision: The TCC held that a party can adjudicate the valuation of a final payment even though there is no
payment notice or pay less notice, and that there is a difference between final payment (where such an
adjudication is permitted) and interim payments (where it is not).
CAUTION: The distinction between interim and final payments no longer appears to be valid following Grove
v S&T (see 2018 above).
See News Analysis: Adjudication and final payment valuations (Kilker Projects Ltd v Purton).
References:
Kilker Projects Ltd v Purton [2016] EWHC 2616 (TCC), [2016] All ER (D) 130 (Oct)
References:
Balfour Beatty Regional Construction Ltd v Grove Developments Ltd [2016] EWCA Civ 990, 168 ConLR 1
Volkerlaser v Nottingham
Topic: Payment applications (default payment notices)
Date of judgment: 7 July 2016
Decision: The TCC held that a contractor’s interim payment application notice was not valid as it had not
been made at the end of a month in which a task had commenced or been completed (as required by the
contract).
Comment: The court agreed with and followed the approach of the TCC in Grove Developments v Balfour
Beatty that HGCRA 1996, s 109(1) does not require the contract to provide for interim payments for all of the
work that is to be carried out.
See News Analysis: In brief: no summary judgment for interim payment application (Volkerlaser v Nottingham
CC).
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References:
Volkerlaser Ltd v Nottingham City Council [2016] EWHC 1501 (TCC), [2016] All ER (D) 123 (Jul)
Bouygues v Febrey
Topic: Non-compliant contracts
Date of judgment: 10 June 2016
Decision: The TCC corrected an obvious error in the parties’ payment schedule, so as to make it compliant
with the HGCRA 1996.
Comment: The court’s approach was to give effect to the contract by amending provisions which were non-
compliant with HGCRA 1996, rather than implying in terms from the Scheme for Construction Contracts. It
can be contrasted with the approach taken in the earlier case of Manor Asset v Demolition Services in which
the court implied a term to ensure compliance (see below).
See News Analysis: In brief: amendment of 'obvious error' in a payment schedule (Bouygues v Febrey).
References:
Bouygues (UK) Ltd v Febrey Structures Ltd [2016] EWHC 1333 (TCC), [2016] All ER (D) 165 (Jun)
References:
COD Hyde Limited v Space Change Management Ltd [2016] EWHC 820 (Ch), [2016] All ER (D) 97 (Apr)
References:
Jawaby Property Investment Ltd v Interiors Group Ltd [2016] EWHC 557 (TCC), [2016] All ER (D) 148 (Mar)
Decision: In circumstances where the parties had amended their contract so badly on payment, with very
short timescales for payment notice and final date for payment, that it was impossible to find any agreement
as to the prescribed period, and the Scheme for Construction Contracts could not be used to fill in the gaps,
the TCC implied a term that a pay less notice could be given at any time immediately up to the final date for
payment (including a nil period).
CAUTION: This decision is likely to be confined to its own facts and it is doubted that it is correct. In the
subsequent case of Bouygues v Febrey (see above), the court did not consider that it was necessary to take
the same approach.
See News Analysis: Adjudication—construction and implication in light of the Scheme (Manor Asset v
Demolition Services).
References:
Manor Asset Ltd v Demolition Services Ltd [2016] EWHC 222 (TCC), [2016] All ER (D) 180 (Feb)
References:
Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] EWHC 168 (TCC), 165 ConLR
153
2015
Harding v Paice (CA)
Topic: Final payments/adjudication as to true value of the works
Date of judgment: 1 December 2015
Decision: The Court of Appeal held that (in relation to a final payment) where a party fails to issue a valid
pay less notice and loses an adjudication on that basis, it can start a fresh adjudication on the question of
valuation.
CAUTION: The distinction between interim and final payments no longer appears to be valid following Grove
v S&T (see 2018 above).
See News Analysis: Court of Appeal confirm ability to adjudicate on valuation despite earlier adjudications
(Harding v Paice).
References:
MJ Harding trading as MJ Harding Contractors v Paice [2015] EWCA Civ 1231, 163 ConLR 299
Comment: In relation to hybrid contracts containing separate payment mechanisms for construction and
non-construction operations, any claim for payment in respect of construction operations must be clear that it
is a notice for the purposes of the HGCRA 1996, and it must be clear which works are covered by HGCRA
1996 and which are not.
See News Analysis: Claiming payment in hybrid contracts for construction operations and excluded
operations (Severfield v Duro).
References:
Severfield (UK) Ltd v Duro Felguera UK Ltd [2015] EWHC 3352 (TCC), 163 ConLR 235
References:
Wilson & Sharp Investments Ltd v Harbour View Developments Ltd [2015] EWCA Civ 1030, 162 ConLR 154
Henia v Beck
Topic: Pay less notices/payment applications (default payment notices)
Date of judgment: 14 August 2015
Decision: The TCC held that an employer was entitled in its pay less notice to give a different valuation from
that set out in a certificate, and that the pay less notice was not restricted to cross-claims. It also found that
the contractor’s payment application could not be considered to be an interim application in relation to the
due date alleged by the contractor.
Comment: A payment application must be clear in substance, form and intent, stating the amount the
contractor considers is due at the relevant due date and be free from ambiguity.
See News Analysis: In brief—payment, pay less notices and liquidated damages under JCT contracts (Henia
Investments v Beck Interiors).
References:
Henia Investments v Beck Interiors [2015] EWHC 2433 (TCC), 161 ConLR 51
References:
Calendonian Modular v Mar City Developments [2015] EWHC 1855 (TCC), 160 ConLR 42
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Leeds v Waco
Topic: Payment applications (default payment notices)
Date of judgment: 22 May 2015
Decision: The TCC held that an interim payment application was invalid as it was made a week earlier than
allowed by the contract.
Comment: The employer needs to have some idea when the interim application is to be made so that it has
the necessary resources to be able to respond to it.
See News Analysis: Stick to the timetable—interim payments in construction contracts (Leeds v Waco).
References:
Leeds City Council v Waco UK Ltd [2015] EWHC 1400 (TCC), 160 ConLR 58
References:
Galliford Try Building v Estura [2015] EWHC 412 (TCC), 159 ConLR 10
2014
ISG v Seevic
Topic: Adjudication as to true value of the works
Date of judgment: 3 December 2014
Decision: The TCC granted a declaration that a second adjudication was invalid for want of jurisdiction,
where an employer had previously been ordered to pay in full an interim application for payment. The court
held that, if an employer failed to serve a pay less notice in time, it must be taken to be agreeing to the value
stated in the contractor’s application, right or wrong. Accordingly, the employer was not entitled to bring a
second adjudication to determine the true value of the works.
CAUTION: This is no longer regarded as good law following Grove v S&T (see 2018 above).
See News Analysis: Second adjudication fails to rectify the absence of a withholding notice (ISG v Seevic
College).
References:
ISG Construction v Seevic College [2014] EWHC 4007 (TCC), 157 ConLR 107
Comment: This decision was upheld by the Court of Appeal (see 2015 above).
See News Analysis: Injunction restraining adjudication refused where issues were not determined in an
earlier adjudication (Harding v Paice).
References:
Harding (t/a M J Harding Contractors) v Paice [2014] EWHC 3824 (TCC), 157 ConLR 98