If an employer fails to serve a pay less notice in response to a contractor’s default payment notice, there can be serious consequences. Because of this the courts have said that a default payment notice must, in substance, form and intent, be an interim application and free from ambiguity. But what about a pay less notice? Do the same requirements apply?

The Quantity Surveyor named in a building contract received the contractor’s ‘Interim Payment Notice’ and then issued a Final Certificate, which stated the sum considered due and was accompanied by a detailed breakdown. The court said the payment notice was valid but was the Final Certificate, plus the supporting material, a valid pay less notice? They met the contractual requirements for a pay less notice but the key question for the court was whether, read together, they were intended to constitute a pay less notice.

The court, ruling that they did constitute a pay less notice, said that it is not necessary for a pay less notice to have that title or to make specific reference to the contractual clause in order to be valid. The question is whether, viewed objectively, it had the requisite intention to fulfil that function.

Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd [2017] EWHC 17