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Further guidance on the form of payment applications

Following the “adjudication roundup” in our autumn 2015 newsletter the court has given further guidance on the required form of a payment notice.

Following the “adjudication roundup” in our autumn 2015 newsletter the court has given further guidance on the required form of a payment notice.

In Jawaby Property Investment Limited v The Interior Group Limited [2016] EWHC 577 the court had to determine whether a contractor’s email attaching a document headed “initial assessment” was a valid application for payment. First, JCT standard clause 1.7 was amended so as to remove the express ability to serve notices electronically. The court rejected the employer’s argument that an application by email was invalid. Whilst the parties did not reference electronic service they had not in fact specifically excluded electronic service. Further, previous applications had all been made by email and accepted. On that basis the court held the employer had acquiesced by its conduct in accepting email applications.

On the question of form, the court held the application was not a valid interim application. It was headed as an “initial assessment”, the work was valued to a date preceding the valuation date and the contractor conceded the application was a “first” valuation intended to “get the ball rolling”. It was not the final sum that the contractor considered to be due to it. The court held “The reasonable recipient of the Valuation would not have regarded it as unambiguously informing it that this was an Interim Application for the purpose of clause 4.8.1”.

For payees, this case further demonstrates the importance of following the contractual mechanism for payment applications to the letter and to make applications in a consistent form that is agreed by the payer. As the court had previously held in Henia Investments, an interim application must be “in substance, form and intent an interim application”.

For payers, caution should be exercised in accepting by conduct an amendment to a contract term on service of documents as it may be found that they have acquiesced in so doing and therefore have lost the ability to argue otherwise.