Can a pay less notice apply to two applications?  

The consequences of failing to serve a valid pay less notice can be severe.  In the recent case Advance JV v Enisca, this led to the contractor being liable to pay its subcontractor £2.7 million more than it considered was the proper entitlement.  It is an interesting case in which the court summarised the law and dismissed Advance’s creative attempts to avoid these consequences.

Construction contracts must have a payment mechanism that complies with the Housing Grants Construction Regeneration Act 1996 (the Act).  Parties can amend standard form contracts if they still meet the mandatory criteria of the Act.

A contract must provide for the submission of an application for payment (AFP) and a payment notice certifying the sum to be paid.  If the paying party does not want to pay the sum (or no payment notice has been served) it must serve a pay less notice.

The key dates in Advance JV were:

• 22 October 2021 – AFP 24
• 19 November 2021 – AFP 25
• 24 November 2021 – pay less notice against AFP 25
• 25 November 2021 – deadline for pay less notice against AFP 24

There was no payment notice or pay less notice expressly served in for AFP 24 and, based on this failure, Enisca sought a ‘smash and grab’ adjudication award.  It succeeded and Advance JV brought a Part 8 claim for a declaration that there was in fact an effective pay less notice against AFP 25.