Several blogs ago, I asked whether a party could still argue that the Notified Sum (as defined in the Housing Grants Construction Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 - the Act) was not payable even in the absence of a Pay Less Notice. To continue the theme of Pay Less Notices and their absence, what about the interplay between construction law and insolvency law - in the absence of a Pay Less Notice, and faced with a petition to the court to wind them up, could a party defend itself by saying that the so-called 'debt' upon which the petition was based was and is disputed or disputable?
Non-payment in the construction industry is a familiar theme. A party who has not been paid a sum of money for work done has the usual panoply of remedies available to it. In some instances, a claimant may choose to go down the 'winding-up petition route' provided for by the Insolvency Act and Rules because it thinks (rightly or wrongly) that the shock value of the debtor company receiving the petition, with the risk to the debtor's future existence, will lead to prompt payment by the debtor of the sum due. To establish that a debt exists and to form the basis of the winding-up petition, the service of a statutory demand is a commonly used tactic by payees.
However could a claimant, simply and without more, rely on the failure by the client to serve a Pay Less Notice under a construction contract to assert that the debt claimed is, as a matter of law, no longer open to dispute by the payer/debtor? As most of our readers will know, where a debt on which a winding-up petition is based is genuinely disputed on substantial grounds, the petition will be dismissed. But can the payer argue that there is a 'genuine dispute' as to the payment of the sum claimed in the absence of a Pay Less Notice? The question is an important one for all those on the receiving end of winding-up petitions.
The case of R&S Fire & Security Services Ltd v Fire Defence Plc  is interesting because it establishes that there can be no basis for disputing the debt if the debt is an application for payment that has not been met with a Pay Less Notice. Therefore, unless the client/employer/payer can mount a genuine and serious cross-claim of an amount in excess of the petition debt (which it might not be able to do), it seems the debtor's petition will succeed - an outcome which should send shivers down the spine in the period of Halloween