UK: Update On Payment

Last Updated: 31 July 2015
Article by Lisa Kingston

Since we last looked at payment at the end of 2014 there have been three important decisions which have cast further light on the approach to payment (and adjudication) that is being taken by the Technology and Construction Court. Galliford Try Building Limited v Estura Limited [2015] EWHC 412 (TCC) looks at how work should be valued where no payment notice, default payment notice, payless notice or final certificate has been issued; Caledonian Modular Limited v Mar City Developments Limited [2015] EWHC 1855 (TCC) examines payment applications in the context of a final account settlement; and Leeds City Council v Waco UK Limited [2015] EWHC 1400 (TCC) deals with the validity of interim applications that were submitted both prior to and after the dates provided for by the building contract.

Galliford Try Building Limited v Estura Limited [2015] EWHC 412 (TCC)

The facts

Estura Limited ("Estura") engaged Galliford Try Building Limited ("Galliford Try") under an amended JCT Design and Build Contract 2011 ("the Contract") for the construction of the Salcombe Harbour Hotel in Devon. The contract contained Housing Grants, Construction and Regeneration Act 1996 ("Construction Act") compliant payment provisions and provided for interim payments to be made to Galliford Try in the usual way.

Near the end of the project, Galliford Try issued an interim application for £4m that it described as being an "indicative final account and valuation summary" ("the interim application") which came in at only around £4,000 less than the amount of the anticipated final account. Estura maintained that the sum due under the interim application was only £147,000 plus VAT, but it failed to serve a payless notice, as a result of which the £4m claimed by the interim application became the sum due.

Galliford Try initiated adjudication proceedings seeking payment of the Notified Sum and the adjudicator found in its favour. Estura then commenced a second adjudication seeking a declaration as to the true amount owing in respect of the interim payment application. The second adjudicator found that he had no jurisdiction in light of the decision of the first adjudicator, adopting the strict approach of the court in ISG v Seevic,1 namely, that in the absence of fraud, contractors are entitled to the amount stated in their payment application regardless of the true value of the work in circumstances where the employer has failed to serve a valid payless notice.

Estura continued to resist making payment and later resisted enforcement on the basis that the decision of the first adjudicator was misguided, and contrary to the earlier decision of the court in Harding v Paice2. That decision provided that any failure by the employer to serve a payless notice would not be critical to its ability to challenge the contractor's final account, as this would create a very unfair situation whereby the employer would be prevented from challenging the contractor's final account for all time.

The decision

In arriving at his judgment, it was necessary for Mr Justice Edwards-Stuart to re-visit his earlier decision in ISG v Seevic, which was causing confusion. The Judge clarified that ISG v Seevic confirmed that a failure to serve a payless notice did not constitute an agreement as to the value of the work at some other date. In other words, whilst an employer's failure to serve a payless notice would prevent it from commencing adjudication proceedings to determine the value of the works as at the date of the interim payment application, it would not prevent the employer from challenging the value of the work at the next payment application.

Applying the Judge's reasoning to the facts of the case, Estura was entitled to certify a new notified sum upon receipt of the next interim payment application; it was not, however, entitled to challenge the sum claimed in Galliford Try's interim payment application. In light of this, Estura had no defence to Galliford Try's application for summary judgment and Galliford Try was awarded the sum claimed in its interim payment application.3

Practice points

  • The decisions in Harding v Paice and ISG v Seevic (as we suggested in our last Insight on payment4) result from the way in which the JCT suite deals with interim payments and termination accounts. In the case of interim payments, in the absence of a payless notice by the employer, the amount of the interim payment is the sum which is stated to be due in the interim payment application.
  • In the case of final accounts, the payment is the amount which is "properly due" in respect of the final account, irrespective of any payless notice.

Caledonian Modular Limited v Mar City Developments Limited [2015] EWHC 1855 (TCC)

The facts

Caledonian Modular Limited ("Caledonian") and Mar City Developments Limited ("Mar) entered into a letter of intent in respect of extensive construction works in North London to which the Scheme for Construction Contracts 1998 ("the Scheme") applied in the absence of Construction Act compliant payment and adjudication terms.

Caledonian's first 14 applications for payment all followed the same format. They were accompanied by a letter attaching the detail of the interim application and setting out the total amount due, the amount previously certified and the net payment due. The letter also identified the date by which a payment notice was to be received, and the date for final payment. On 20 January 2015, Caledonian issued its application for payment number 15 ("Payment Application 15"), and on 5 February 2015, Mar issued what was agreed to be a valid payless notice which almost wiped out the sum claimed.

On 12 February 2015, Caledonian sent Mar an email relating to the ongoing negotiations for the final account.

On 13 February, Caledonian emailed Mar an updated version of Payment Application 15 to reflect an agreement that had been reached between them in relation to one item, and asked Mar to update its payment notice to take account of the agreement, but Mar did not issue an updated payment notice as Caledonian had requested. Caledonian subsequently asserted that the updated payment application was a fresh payment application (number 16) and that Mar's failure to serve a payless notice in response to it rendered Mar liable for the full £1.5 million claimed. Caledonian's position was upheld by the adjudicator in the adjudication proceedings that followed, and Mar resisted enforcement by seeking a declaration as to the status of Caledonian's updated payment application.

The decision

Mr Justice Coulson held that the updated payment application did not constitute a new valid payment application under the Scheme, nor was it treated as such by the parties at the time it was issued. On 13 February 2015, Caledonian did not say, clearly or at all, that it was making a fresh application for an interim payment (even when challenged by Mar to explain what it amounted to). There was a fair inference that the updated payment application did not make clear it was a new application for interim payment because that was not how Caledonian itself viewed it; rather, it was an update of the final account. Moreover, the Judge emphasised that it was not possible for Caledonian to have served an updated payment application prior to the period for payment application 16 expiring; to do otherwise would make a mockery of the notice provisions under the Construction Act and the Scheme, and would run the risk of contractors making fresh claims every few days in the hope that, at some point, the employer or its agent would take their eye off the ball and fail to serve a valid payless notice.

Practice points

  • When making an application for an interim payment or a payee's notice, you must set your claim out with clarity so that the employer is given reasonable notice that the payment period has been triggered. Ensure your application makes clear on its face that it is an application for an interim payment or payee's notice to avoid any later dispute as to its status.
  • As Mr Justice Coulson held obiter in this case, interim applications probably cannot be made early, outside of the agreed payment mechanism, unless at the very least the fact that it is made early is drawn to the employer's attention. Given this was an obiter finding, you should err on the side of caution and always serve interim applications in strict accordance with the contractual payment dates.

Leeds City Council v Waco UK Limited [2015] EWHC 1400 (TCC)

The facts

Leeds City Council ("the Council") engaged Waco UK ("Waco") in relation to the design, manufacture and installation of modular classroom buildings at a primary school in Leeds under an amended JCT Design and Build Contract, 2005 Edition, Revision 2, 2009 ("the Contract").

The Contract included the usual interim payment provisions prior to practical completion on specific dates set out in the payment calendar that was included with the contract particulars. Waco's payment applications were issued roughly monthly, but never on the dates provided for by the Contract. As a general rule, the Council's agent and contract administrator ignored the fact that the payments were usually submitted a few days late, and the Council paid the amounts applied for.

Following practical completion, the Contract provided that applications for interim payments were to be made at intervals of 3 months "unless otherwise agreed", and Waco continued to submit its payment applications erratically. The situation continued until 22 September 2014, when, post-completion, Waco made an application for payment, this time not late but 6 days early. The Council failed to serve a payment notice and did not pay the application, as a result of which Waco initiated adjudication proceedings and obtained an award for payment in its favour, but still the Council refused to make payment. Waco brought enforcement proceedings, and in response the Council sought a declaration that the adjudicator's decision was wrong on the basis that Waco's payment application of 22 September 2014 was invalid.

The decision

Mr Justice Edwards-Stuart found in favour of the Council and held that the contractual requirement for an application to be made on specific dates provided for by the Contract required Waco to state the total value of work that had properly been carried out as at the valuation date. Because Waco's payment application had been made 6 days before the valuation date, it was deemed by the court to be invalid.

Practice points

When making payment applications, it may be possible for you to rely either upon an implied term, or an established course of dealing between the parties (for example, a series of payment applications made three or four days after the valuation date; a one-off payment would not suffice), which might allow you to submit the application within a reasonable time of the valuation date, but this would probably only stretch to a few days at the very most.

" It is important to note that there is no scope for payment applications to be submitted prior to the valuation date unless the contract makes express provision for the valuation dates to be varied (for example, by the use of the words "unless otherwise agreed").


The above decisions serve to confirm that it is imperative for parties to follow the contract to the letter in regard to payment and strictly observe all payment dates, or face what can be draconian consequences.

The position in regard to payment, however, is not entirely satisfactory. First, the decision in Galliford Try v Estura leaves a glaring loophole under the JCT suite which leaves it open to astute contractors to submit a very inflated payment application which is to all intents and purposes a final account.5

Secondly, the position in regard to interim payments and final accounts is inconsistent concerning compliance with notice provisions. For interim payments, there is a very strict approach to compliance, whereas in the case of final accounts the position is more indulgent. The Court of Appeal is due to revisit the position in regard to final accounts in November 2015 when it hears the appeal in Harding v Paice, and it therefore remains to be seen whether the more indulgent approach to final accounts will survive.


1. For full details of this case, see http://

2. For full details, see

3. In theory, it would have been possible for Estura to rectify its failure to serve a payless notice by issuing a payless notice at the next interim payment application, but by virtue of the fact that Galliford Try had recovered almost everything that it was hoping to recover in its interim payment application, it had no incentive whatsoever to submit its final account thus depriving Estura of challenging or reassessing the sum claimed in the interim application.

4. Supra.

5. The majority of JCT contracts do not provide for a repayment of any overpayment until the final account stage, even if a negative payment notice is issued. That said, some employers may seek to introduce an amendment providing for repayment of any overpayment prior to the final account stage and negative payments to counteract this.

Please click here to view previous issues of Insight

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Lisa Kingston
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.