Advance JV (A Joint Venture between (1) Balfour Beatty Group Limited; and (2) MWH Treatment Limited); and Enisca Limited [2022] EWHC 1152 (TCC)

The judgment in Advance JV vs Enisca Limited should serve as a timely reminder that a failure to adequately issue a pay less notice can lead to an employer, ultimately, paying more.

The parties were carrying out works under an amended form of NEC3 Engineering and Construction Contract (Option A). The question in the adjudication and subsequent Part 8 proceedings was the extent to which one pay less notice could apply to two different applications for payment.

The relevant dates were as follows:

• Enisca made an application for payment (“AfP Nr.24”) for circa 2.7m on 22 October 2021;
• Advance failed to issue any payment certificate or pay less notice against AfP Nr.24;
• On 19 November 2021, Enisca made a further application for payment (“AfP Nr.25”);
• On 25 November 2021 Advance issued a payment certificate and a pay less notice (the “November Pay Less Notice”).

Perhaps unsurprisingly, the November Pay Less Notice referred only to one application for payment, being the most recent application, AfP Nr.25. Enisca pointed out that no notices were issued by Advance against AfP Nr.24 and that it was entitled to the notified sum stated in AfP Nr.24.

Enisca commenced an adjudication for payment of the sum applied for in AfP Nr.24, and won.

Advance commenced Part 8 proceedings to determine the validity of the November Pay Less Notice against AfP Nr.24. Advance argued that the November Pay Less Notice was issued in time against both applications for payment. Whilst this is not usually possible in different payment cycles, in the case the payment terms had been amended creating this cross-over of time periods. As the November Pay Less Notice made clear that no payment was due, Advance’s position was that this applied to all extant applications for payment (i.e. AfP Nr.24 and AfP Nr.25).

Whilst the court considered the “novel” arguments put forward by Advance, the judgment ultimately upheld the decision of the Adjudicator.

In terms of takeaways:

• A pay less notice must specify the application or payment cycle to which it relates; and
• The importance of serving notices which can be objectively understood has again been reiterated by the Court, as it makes clear that it will upheld technical breaches of the payment regime in order to continue to uphold the spirit of the Construction Act.

This case is interesting given the payment provision allowed for a pay less notice to potentially straddle two payment cycles. However, this makes administration of the contract more challenging as a project manager could have two payment cycles and sets of notices to deal with, rather than one set in sequential cycles. Despite this bespoke provision, the key message from the judgment should be applicable to most parties in construction contracts.

In short, if a party wants to pay less, the requisite notice must be issued on time and specifically refer to the application of payment/payment cycle/notified sum to which it relates. If a party fails to do that, then it may be the case that the employer will end up paying more.

Read the full judgement here.

This case report was written by Richard Adams and Oliver Macrae.