[2025] EWHC 1526 (TCC)

Looking at the Application on its face, the natural reaction of a reasonable recipient would be that this was indeed, as it was described, an application for an interim payment. LAPP were asserting that £100,000.00 was due and that this sum was to be paid within 14 days. It was not “an impossible or Herculean task” for Formations to respond with a valid Payment Notice or Pay Less Notice.

The mischief which has concerned the Judges of this court in the cases summarised in Kersfield and Advance JV is that payees may take unfair advantage of the post-2011 regime. That could occur where payers are simply not put on notice that an interim payment is being sought, such that they cannot be expected to be ready with their own notices. On the face of it, that mischief is not present in this case: LAPP made very clear they were seeking an interim payment, to be made promptly.

However, Formations say that the Application was not a valid application for interim payment in accordance with the Scheme because:

“(i). It was not an application for an amount representing an interim payment in accordance with para 2(1) of Part II of the Scheme as the amount purportedly applied for was not the difference between an amount determined in accordance with paragraph 2(2) of the Scheme and an amount determined in accordance with paragraph 2(3) of the Scheme.

(ii). It was ambiguous and was not by substance, form and intent an interim payment application under the Scheme:

(1). The “total payment now due” was stated to be £341,854.32 (inclusive of VAT) but the payment “requested on account” in the application was £100,000 plus VAT. It was stated to be a request for an arbitrary sum as “payment on account” based on a “provisional valuation of the works carried out” pending a proper valuation of the works and/or agreement of the value of the works;

(2). Payment was stated to be due “within 14 days” whereas if it was an application under the Scheme, payment would have been due either “on the expiry of 7 days following the completion of the work to which the payment relates” or “the making of a claim by the payee”.

(3). The sums described in the application were stated to be provisional and “subject to any agreed adjustment following assessment by Jonathan Grubb of Northcote Building Consultancy”.”

(para 7 of Part 8 Claim Form)

I will deal with these points in turn.

As to point (i), the Application did set out “the difference between the amount determined in accordance with sub-paragraph (2) and the amount determined in accordance with sub-paragraph (3)”, as required by para 2(1) of the Scheme. However, the Application, having stated that the “Total payment now due” was £ 341,854.32, then “requested on account” the sum of £120,000 inc. VAT.

It seems to me that it would be an absurd reading of para 2 of the Scheme that an application would be valid if it sought “the difference between the amount determined in accordance with sub-paragraph (2) and the amount determined in accordance with sub-paragraph (3)”, but would be invalid if it required £1 or £100 less than this amount.

In my view, LAPP had quite accurately complied with para 2 of the Scheme, but then went on to seek a lesser sum “on account”. Given the apparent state of negotiations over the final account, they were realistically and commercially confining themselves to a claim for a smaller sum than para 2 would, on its face, have entitled them to claim. That, it seems to me, does not invalidate the Application.

Likewise, I do not think (point (ii)(1)) that this request for an “on account” payment rendered the Application ambiguous or not in substance, form and intent an interim payment application under the Scheme. There was no ambiguity: LAPP sought to be paid £100,000.00 plus VAT.

The Application was in substance, form and intent an interim payment application under the Scheme since LAPP set out their valuation of the works as a whole and then, as noted above, confined the Application for payment to a lesser sum. Save for the electrical works, the valuation was reasonably detailed. It provided an adequate agenda for an adjudication as to the true value of the Works: indeed, Formations’ Quantity Surveyor was able to raise 31 queries/challenges to the sums sought by his email of 21^st April 2023.

As to the dates for payment (point (ii)(2)), this point seems to me to be misconceived. LAPP were saying that at least £100,000.00 was due as at 14^th April 2023 and that this should be paid by 28^th April 2023. In the language of the Scheme (of which both parties seem to have been wholly unaware in fact), they were saying that:

It may be that one or other of these dates was erroneous. But, in my judgment, that would not invalidate the Application. Rather, Formations might have been entitled to respond that the due date and/or the final date for payment had not yet arisen. That goes to points that might be raised in answer to the Application, rather than to the validity of the Application itself. Furthermore, I was not shown any authority which required the due date or final date to be accurately stated in order to render a payee’s notice compliant with the Act and the Scheme.

The final argument made by Formations (point (ii)(3)) is that Mr Harris said in his email that the “amount is based on my provisional valuation of the works carried out, and may be subject to any agreed adjustment following assessment by Jonathan Grubb of Northcote Building Consultancy”. That does not seem to me to invalidate the Application to be paid £100,000. That sum was based on a detailed valuation, subject to the fact that information was awaited from LAPP’s electrical contractor and subject to the inevitable expectation that there would be final account negotiations with Formations’ QS. But, unlike the situation described at para 56 (c) of Jawaby, this was not “a very far cry from a statement by TIG of the sum that it considered to be due to it for the purpose of clause 4.8.1 of the Contract and such as to carry the draconian consequences of the payment regime that follows”: LAPP were definitely saying that at least £100,000.00 was due as at 14^th April 2023.

Standing back, and looking at the Application in a common sense, commercial way, it seems to me obvious that LAPP were making an application for an interim payment in the sum of £100,000.00 plus VAT:

I think that any other approach to the Application would be to fall into the trap of “nice points of textual analysis or arguments which seek to condemn the notice on an artificial or contrived basis”, as warned against at para 47(iv) of Advance JV. To paraphrase what Sir Peter Coulson says in his textbook, cited at the same sub-paragraph, the courts will take a commonsense, practical view of the contents of a payee’s notice and will not adopt an unnecessarily restrictive interpretation of such a notice. Provided that the notice makes tolerably clear what is being claimed and why, the court will not strive to intervene or endeavour to find reasons that would render such a notice invalid or ineffective.

Finally, and considering the approach in Kersfield, the 14^th April documents: