Holmes & Hills' construction solicitors successfully defended a real estate business against a notified sum adjudication brought by a specialist joinery contractor.
The parties' contract contained five agreed payment stages. The first four stages were tied to specified dates, while the fifth and final stage became payable on completion of the works.
The contractor issued, and later reissued, its final invoice even though the completion milestone had not been achieved. Significant defects remained in the works which went beyond ordinary snagging.
The contractor commenced an adjudication seeking payment of the final invoice. It argued that no payment milestones had been agreed and that the Scheme for Construction Contracts therefore governed the timing of interim payments.
The claim was described as a 'smash-and-grab' adjudication, an informal term coined and commonly used within the construction industry. Strictly speaking, the claim concerned the alleged non-payment of a notified sum.
Holmes & Hills demonstrated from the parties' agreement and surrounding evidence that the five payment stages had been agreed. As the contractor had not achieved the condition for the fifth stage payment, its invoice was not a valid application for payment.
The adjudicator also accepted that the reissued invoice could not operate as a valid application. Information had been copied from the earlier invoice, leaving the document unclear and ambiguous as to the relevant due date.
The parties had also advanced arguments about whether an email sent by the employer amounted to a valid pay less notice. Having decided that the contractor's underlying application was invalid, the adjudicator did not need to determine that issue.
The contractor's notified sum claim failed. Our client was not required to pay the final invoice and remained able to rely on the cost of necessary remedial works in any subsequent assessment of the true value of the works.
At the date of publication, the contractor had not commenced a true value adjudication.
The absence of a payment notice or pay less notice does not automatically entitle a contractor to the amount claimed. A notified sum must first have arisen. The validity, clarity, timing and service of the underlying payment application can therefore be decisive.
If you are considering a notified sum adjudication or have received a Notice of Adjudication, the contract and complete payment history should be reviewed immediately.
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