Under s111 of the Housing Grants, Construction and Regeneration Act 1996, failure to issue a pay less notice renders the sum applied for the "notified sum". The recent case of Kilker Projects Ltd v Purton (t/a Richwood Interiors) [2016] EWHC 2616 (TCC) ties up the loose ends of a recent string of cases examining the knotty issue of when a "notified sum" can be revalued. The cases are well known but bear repeating.....

ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC) and Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC) confirmed that, having failed to serve a valid pay less notice, a party is deemed to have agreed the value of an interim application for payment, that value becomes the "notified sum", and a subsequent adjudicator could not deal with revaluing the "notified sum". However, this principle only applies to interim payments and the notified sum could be competently reassessed in the final account (Harding (t/a M J Harding Contractors) v Paice and another [2015] EWCA Civ 1231).

In Kilker the court followed the decision in Harding but also clarified the position as to which final accounts can be revalued. The answer, it appears, is all of them.

In an initial adjudication, the adjudicator held that Kilker's failure to issue a valid payless notice in respect of Purton's final account rendered it the "notified sum" and entitled Purton to payment of the value of its final account in full. In a second adjudication, Kilker asked the adjudicator to revalue the final account on the basis it was a "notified sum". Purton argued that in the absence of a pay less notice the "notified sum" became final and determinative, and that the adjudicator lacked jurisdiction because the value had already been decided. The adjudicator agreed with Kilker, and so did the court.

Concluding that interim applications are merely a means of ensuring cash flow and that they do not affect the ultimate value of the contract sum, the court made clear that: "Very clear words would be required if Parliament intended to impose a scheme that would interfere with the commercial value of the bargain freely negotiated by the parties". Accordingly, it could not be the case that failure to issue a pay less notice could be enough to alter a concluded bargain and Purton's final account must be capable of being revalued.

For employers this will be further welcome news and confirms even a failure to issue a payless notice in respect of the final account is no longer an opportunity for a contractor to claim a windfall.


Louise Shiels

Head of Dispute Resolution and Risk & Partner

Manus Quigg


Andrew Groom

Senior Associate