Payment Notices, Payless Notices, and Notified Sums: Key decision from the High Court

The recent case of Placefirst Construction Ltd v CAR Construction (North East) Ltd [2025] EWHC 100 (TCC) provides valuable guidance on the interpretation of payment notices, payless notices, and notified sums under construction contracts.

CAR were employed as subcontractors by Placefirst under an amended JCT Design and Build 2016 Sub-Contract. CAR were required to submit their monthly application for payments no later than the 25^th of each month. Placefirst were then required to issue a payment notice no later than five days after the due date, with the amount specified in the notice to be paid before the final date for payment (as specified in the contract). Placefirst was also entitled to issue a payless notice no later than two days before the final date for payment.

On 24 July 2024, CAR submitted their application for payment in line with the subcontract provisions. On 31 July 2024, Placefirst sent an email attaching a "Payless Notice.pdf" and a sperate excel document titled "Valuation 30.xlsm" provided "to support" the Payless Notice. In a 'smash and grab' adjudication CAR argued that (1) these documents clearly constituted a payless notice, and (2) it was invalid to serve a payless notice in response to an application for payment until that application has become a default payment notice. The adjudicator upheld CAR's position.

The Court disagreed. Part II of the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the "Act") provides that where the contract requires a payee to submit an application for payment, that application will be regarded as the default payment notice where a payment notice is not given by the payer, and thus the application for payment will be treated as setting out the notified sum. The Court decided that CAR's application for payment was to be regarded as a payment notice when it was served, rather than after the date when Placefirst could have issued its payment notice. Therefore, while a payless notice cannot be issued before an application for payment, there is no reason it cannot be issued any time after.

The Court further determined that, when considering the excel document in line with the requirements of the Act and the amended subcontract, the worksheet attached to Placefirst's email was clearly intended as a separate payment notice. There was no requirement for it to refer to itself as a payment notice and it was not "purely subsidiary" to the payless notice.

Implications

The Court's will not take an "unduly legalistic interpretation" to payment and payless notices – preferring a commonsense, substance over form approach. It was confirmed that both a payment and a payless notice can be served simultaneously under cover of the same email or letter, although it should be noted that a single notice still cannot operate as both. It has further been made clear that a payless notice can be served immediately following an application for payment - effectively allowing for "early" service of a notice.