Construction Act requirement to give a pay less notice applies to final and interim payments

This blog post considers the recent Court of Appeal decision in Adam Architecture Ltd v Halsbury Homes Ltd [2017] EWCA Civ 1735.

In Adam Architecture Ltd v Halsbury Homes Ltd [2017] EWCA Civ 1735, the Court of Appeal has confirmed that the requirement to serve a pay less notice under section 111 of the Construction Act 1996 applies to final payments due following completion of the works or termination of a contract, as well as interim payments.

Section 111(1) of the Construction Act 1996 provides that “… where a payment is provided for by a construction contract, the payer must pay the notified sum (to the extent not already paid) on or before the final date for payment.”

Section 111 (3) provides that “The payer may in accordance with this section give to the payee a notice of the payer’s intention to pay less than the notified sum.”

A firm of architects, Adam Architecture, appealed against the first instance decision that the respondent employer, Halsbury was not liable to pay an invoice which the architects had issued at the termination of their engagement. The first decision had found that the employer was not required to serve a pay less notice because the contract had been discharged and the invoice was a final account.

The Court of Appeal maintained that it was clear from the language of the statute that section 111 related to all payments which were "provided for by a construction contract", not just interim payments.

It was also clear from previous authorities that s.111 applied to both interim and final applications for payment. In particular in Rupert Morgan Building Services (LLC) Ltd v Jervis [2003] EWCA Civ 1563 and Harding (t/a MJ Harding Contractors) v Paice and another [2015] EWCA Civ 1231, it was agreed by the parties that section 111 applied to final certificates as well as interim certificates.

The Court of Appeal held that if the employer wished to resist paying the architect's final account, it had been obliged to serve a pay less notice under section 111(3) of the Construction Act.

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