[2018] EWHC 123 (TCC)

This dispute here arose out of the construction of a new Premier Inn Hotel at Heathrow Terminal 4. The contract incorporated the JCT Design and Build Contract 2011. The contractual completion date was 10 October 2016. Practical completion was not achieved until 24 March 2017.

There had been three adjudications. In the second, S&T were awarded a partial extension of time. The third decided that Grove’s Pay Less Notice of 18 April 2017 was invalid. This last decision meant that, on the face of it, S&T were entitled to be paid in excess of £14 million pursuant to their interim application no. 22. Grove had already commenced Part 8 proceedings which came before Mr Justice Coulson in his last decision as a judge at the TCC.

The first issue was whether or not Grove’s pay less notice complied with the contractual requirement to specify the basis of the calculation. Mr Justice Coulson noted that:

“A pay less notice will be construed by reference to its background, in order to see how a reasonable recipient would have understood it. The court will be unimpressed by nice points of textual analysis, or arguments which seek to condemn the notice on an artificial or contrived basis. One way of testing to see whether the contents of the notice are adequate is to see if the notice provides an adequate agenda for a dispute about valuation and/or any cross-claims available to the employer.”

Here, the pay less notice did properly set out the basis of the calculation. The Judge referred to a detailed spreadsheet attached to the payment notice which would have permitted the reasonable recipient to understand precisely how Grove’s valuation was made up. In contrast to the notice in Muir, (see Dispatch 209) there were detailed figures for every separate element of the works. The same spreadsheet had been used by each party to identify their differences. Further, there was no objection in principle to a notice referring to a detailed calculation set out in another, clearly identified document. In the view of the Judge, that was how things are commonly done. Accordingly, S&T’s argument came down to a submission that even though it was plain on the face of the pay less notice where the detailed calculation could be found, the notice was invalid because the spreadsheet was not re-sent and was instead only referred to. That argument was “artificial and contrived”

The Judge recognised that if a party incorporates a document already sent by reference, and does not re-send it, then that party takes the risk that something may go wrong with the technology or the mode of delivery of the first document. Equally, the words of reference, or the precise document being referred to, might be unclear. However, that had not happened here. The Judge also noted that there was at the time no suggestion that S&T did not know precisely what was being referred to in the pay less notice, something which may explain the lengthy delay before the point was first taken.

Read Part 2 and Part 3.