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Interim application – is it valid?

In his article posted in September 2016, Richard Millard summarised the current position of interim applications for payment, payment notices and pay less notices under a construction contract.

The case of Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd [2017] EWHC 15 (TCC) looked at, in the context of whether an interim application was valid the meaning of ‘the basis on which that sum [applied for] is calculated’,  and also the timing of the service of a pay less notice.

Kersfield appointed Bray under a JCT Design and Build Contract 2011 to carry out residential works. Bray issued an interim payment application which comprised of an excel spreadsheet setting out a breakdown of the works, percentage complete and value of the work done and a loss and expense claim.

Kersfield provided a payment notice in response but it was out of time. The deadline for Bray to then send a pay less notice was 14 August 2016—it sent one by email at 21:50 on Friday 12 August, however under the amended notice provision of the contract it was deemed served the next business day, which was Monday 15 August.

Kersfield argued that Bray’s interim payment application was invalid as it had not set out the basis of the calculation for the sum due. Their complaint was really about insufficient substantiation of the amounts claimed, and, while such a deficiency might justify rejection of the claim [in a valid payment notice or pay less notice], the Court held it would not render the application notice itself invalid (unless the contract provided that it would).

On the issue of whether the pay less notice was late, the court rejected Kersfield’s argument and found that the date of service of the notice was, applying the terms of the contract, on the 15 August and was therefore not valid.

This case confirms that to be valid, a payment application must set out the amount claimed and the basis on which it is due. An application for interim payment must be sufficiently clear and unambiguous in form, substance and intent so that the parties have notice of the application made. Provided that criteria is met, a failure to provide sufficient substantiation of the amounts claimed will not affect the validity of the application unless the contract expressly states that it will.

If you need assistance contact Richard Millard, Dispute Resolution Partner on 01908 689382 or email rmillard@geoffreyleaver.com.