The importance to issue Pay Less Notices on your contractor or sub contractor promptly

Learn about the importance of timely Pay Less Notice

This case emphasises how important it is to issue Pay Less Notices on your contractor or sub contractor promptly and within the time scales laid down.

The courts have refused to enforce an adjudicator’s decision valuing an interim application. This unusual step was because the adjudicator had previously decided a sum was owed by the Employer in respect of the same interim application – not on a valuation basis but because of it’s failure to serve a pay less notice.

There were two adjudications. In the first Adjudication the Contractor had successfully claimed £1.1m from the Employer because the Employer had failed to serve a Pay Less Notice disputing the sum to be paid. In effect they did not make payment of the amount of the Contractor’s interim application. The win was therefore a technical knockout rather than a win on a pure valuation basis.

However (and presumably because they thought they would lose the first Adjudication) just before the decision in adjudication 1 the Employer launched another adjudication requesting the adjudicator to value the sum that was due to the Contractor in the same interim application.

This was on the grounds that the adjudicator was not making a decision in the first adjudication on the value of the interim payment because that was to be decided on the knockout basis.  The adjudicator accepted that the second Adjudication was in fact a different dispute, and decided that the Contractor should actually have been paid around £300,000, not the £1.1m awarded in the first Adjudication.

The Employer paid the Contractor the £300,000 but the Contractor issued enforcement proceedings to recover the other £800,000 from the first Adjudication.  The Employer also issued its own enforcement proceedings in respect of the second adjudication.

The court found that in deciding first that £1.1m was payable, and then that the value of the valuation was only £300,000, the adjudicator had made two decisions about on the same dispute – it is important to note a dispute can only be decided once by an adjudicator. The court found that the decision in the second adjudication was of no effect.

The important point is this: the courts will not permit a party who fails to follow the statutory scheme and issue a Pay Less Notice to recover its position in a second adjudication.  Although the interim valuation may have been wrong the Employer will now have to start court proceedings in order to recover the sums due to it.

This case emphasises how important it is to issue Pay Less Notices on your contractor or sub contractor promptly and within the time scales laid down.

The courts have refused to enforce an adjudicator’s decision valuing an interim application. This unusual step was because the adjudicator had previously decided a sum was owed by the Employer in respect of the same interim application – not on a valuation basis but because of it’s failure to serve a pay less notice.

There were two adjudications. In the first Adjudication the Contractor had successfully claimed £1.1m from the Employer because the Employer had failed to serve a Pay Less Notice disputing the sum to be paid. In effect they did not make payment of the amount of the Contractor’s interim application. The win was therefore a technical knockout rather than a win on a pure valuation basis.

However (and presumably because they thought they would lose the first Adjudication) just before the decision in adjudication 1 the Employer launched another adjudication requesting the adjudicator to value the sum that was due to the Contractor in the same interim application.

This was on the grounds that the adjudicator was not making a decision in the first adjudication on the value of the interim payment because that was to be decided on the knockout basis.  The adjudicator accepted that the second Adjudication was in fact a different dispute, and decided that the Contractor should actually have been paid around £300,000, not the £1.1m awarded in the first Adjudication.

The Employer paid the Contractor the £300,000 but the Contractor issued enforcement proceedings to recover the other £800,000 from the first Adjudication.  The Employer also issued its own enforcement proceedings in respect of the second adjudication.

The court found that in deciding first that £1.1m was payable, and then that the value of the valuation was only £300,000, the adjudicator had made two decisions about on the same dispute – it is important to note a dispute can only be decided once by an adjudicator. The court found that the decision in the second adjudication was of no effect.

The important point is this: the courts will not permit a party who fails to follow the statutory scheme and issue a Pay Less Notice to recover its position in a second adjudication.  Although the interim valuation may have been wrong the Employer will now have to start court proceedings in order to recover the sums due to it.