English Technology and Construction Court reinforces importance of compliance with contractual payment regimes

In Vision Construct Ltd v Gypcraft Drylining Contractors Ltd, the Technology and Construction Court (TCC) has confirmed that Part 8 proceedings are not a backdoor route to overturn an adjudicator’s “notified sum” decision where the payment regime in the relevant contract is workable and the issue is simply late or mislabelled notices.

The court will generally respect commercially coherent payment timetables (even with bespoke terminology), enforce strict compliance with Payment Notice and Pay Less Notice requirements, and take a cautious approach to estoppel arguments based on informal “course of dealing”.

Payment regimes in construction contracts must comply with the requirements of the Housing Grants, Construction and Regeneration Act 1996. This includes strict compliance with the periods specified for the issue of Payment Notices and Pay Less Notices. If the contract fails to provide an adequate payment mechanism, the statutory Scheme for Construction Contracts will be implied into the contract to govern the payment regime. Part 8 proceedings provide an alternative, streamlined court process where the courts are required to determine straightforward legal questions that are unlikely to involve substantial factual disputes.

Background

Vision Construct Limited (the main contractor) engaged Gypcraft Drylining Contractors Limited (the subcontractor) under an amended JCT Design and Build Sub-Contract 2016 with a bespoke payment schedule.

For one payment cycle, Vision was required to issue a payment notice by 2 February 2023 and any pay less notice by 16 February. Instead, it sent a document on 7 February headed “Payment Notice” (late) and served no Pay Less Notice. Gypcraft referred the dispute to adjudication.

The adjudicator decided that, without a valid Payment Notice or Pay Less Notice, Gypcraft’s application became the “notified sum” which was due under the contract and ordered Vision to pay £216,947.75 plus interest.

The Part 8 claim

Vision paid the awarded sum, but then brought Part 8 proceedings in the TCC, arguing that the adjudicator’s decision was wrong because:

• the contractual payment schedule did not specify compliant interim valuation dates, so the Scheme should override the agreed payment regime and there was no valid application;
• a course of dealing created an estoppel by convention allowing Vision to serve late payment notices; and
• the late “Payment Notice” should instead be treated as a Pay Less Notice.

TCC decision

The court dismissed all three arguments on the following grounds:

• Payment mechanism: The court held that the payment schedule, read with the JCT terms, set a coherent and workable payment timetable, even though they used inconsistent labels. There was no basis to imply the Scheme to replace the parties’ agreed mechanism.
• Estoppel by convention: The alleged “custom and practice” of accepting late notices did not amount to a clear, shared assumption that late notices were contractually effective, nor was there sufficient evidence of reliance and detriment. The court also highlighted that fact‑sensitive estoppel arguments are generally ill‑suited to Part 8.
• Re‑badging notices: A document issued as a Payment Notice cannot later be treated as a Pay Less Notice to cure a missed deadline. The Construction Act and the contract between the parties required strict compliance as to timing and clarity of payment-related notices.

Osborne Clarke comment 

The case reinforces a familiar message: if the contractual payment mechanism works, the court will not re-engineer it to rescue a party from poor notice administration, nor will it readily disturb a notified‑sum adjudication via Part 8.

Key practical takeaways from the decision are as follows:

• Payment timetable: If your payment regime is intelligible and complete, the court will usually give it effect, even with bespoke terminology. Don’t rely on the Scheme for Construction Contracts to “save” a poor administration of notices.
• Estoppel is a high bar: Occasional tolerance of late notices will rarely prevent strict enforcement of contractual deadlines and create an estoppel.
• Keep notices distinct: Payment Notices and Pay Less Notices have different roles and deadlines; a late Payment Notice cannot be relabelled later.
• Operational discipline: Diarise key dates, use separate templates for Payment Notices and Pay Less Notices, and keep good service records. Most notified‑sum disputes are avoided by disciplined notice administration.

Ibrahim Issa, a solicitor apprentice with Osborne Clarke, contributed to this Insight.