The requirements of a valid payment notice issued under a
construction contract were considered in a previous update:
"A Payment Notice? Be Clear?" with reference to the
case of Surrey and Sussex Healthcare NHS Trust v Logan
Construction (South East) Ltd  ("Surrey and
Sussex") a decision of the English High Court.
In the week following this decision the Scottish Sheriff Appeal
Court was similarly tasked with determining the validity of payment
notices in Trilogy Services Scotland Limited v Windsor
Residential  ("Trilogy").This update
considers the approach taken in Trilogy and the impact the
differing decision will have on the validity of payment notices
issued under construction contracts.
Trilogy Services, civil engineering contractors, were employed
by Windsor Residential to carry out works in Burntisland. The
contract between the parties was brief and, as required by the
Housing Grants, Construction and Regeneration Act 1996 ("1996
Act"), the relevant provisions of the Scheme for Construction
Contracts (Scotland) Regulations applied including specifically the
provisions in relation to payment notices.
Windsor Residential failed to remunerate Trilogy Services, or
issue a notice, in respect of its final invoice. Thereafter Trilogy
Services sent a letter and the outstanding invoice to Windsor
Residential demanding payment. In the absence of payment, Trilogy
Services raised an action. It was for the Sheriff Appeal Court to
determine whether the letter sent by Trilogy Services to Windsor
Residential constituted a valid payment notice.
While Windsor Residential did not dispute that the payment
notice complied with the requirements in the 1996 Act, it was their
position that Trilogy Service's intention for the letter to be
a payment notice was lacking. In support, the decisions in
Caledonian Modular Ltd v Mar City Developments Ltd 
and; Henia Investments Inc v Beck Interiors Ltd 
were relied on. In both of these decisions the Technology and
Construction Court (TCC) took the factual context into account in
order to determine whether the parties intended the
documents in question to represent valid payment notices.
On arriving at his decision in Trilogy the Sheriff
distinguished both Caledonian and Henia on the
basis that the documents relied on in those cases lacked clarity.
In the present case the Sheriff determined that the factual context
of the documents was clear and, consequently, Trilogy Service's
intention for the document to constitute a valid payment notice was
clear. The Sheriff determined that the letter and
accompanying invoice did constitute a valid notice under the 1996
In Trilogy the Sheriff passed comment on the
requirement of intention and valid payment notices, stating that to
import a requirement of intention in each and every case would
"drive a horse and cartthrough the provisions of
the 1996 Act". The Sheriff's decision may be
considered as a more conservative interpretation of the 1996 Act
than that taken in Surrey and Sussex however
Trilogy can be distinguished as that the factual context
behind the payment notices was clear and undisputed. The
same could not be said in Surrey and Sussex.
For the avoidance of doubt: a contractor ought to state clearly
its intentions behind a payment notice and; an employer should
consider purported payment notices carefully to ensure the validity
requirements are satisfied.
The material contained in this article is of the nature of
general comment only and does not give advice on any particular
matter. Recipients should not act on the basis of the information
in this e-update without taking appropriate professional advice
upon their own particular circumstances.
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