Court ruling emphasizes how timing and correct labelling of payment & pay less notices is critical; informal practices or assumptions based on past dealings will not protect contractors.
In Vision Construct Limited ('VCL') v Gypcraft Drylining Contractors Limited ('Gypcraft') [2025] EWHC 2707 (TCC), the Technology and Construction Court ('TCC') rejected an attempt by VCL to overturn an adjudicator’s ruling that awarded over £216,000 plus interest to its subcontractor Gypcraft, following VCL's failure to adhere to the contractual and statutory payment regime under the Housing Grants, Construction and Regeneration Act 1996 (the 'Act').
Background
In November 2020, VCL appointed Gypcraft as subcontractor pursuant to the terms of a JCT DBSub/C 2016 Subcontract.
Gypcraft had historically accepted paayment notices issued by VCL later than stipulated in the subcontract. However, following issue of a payment notice by VCL that was 5 days late, seeking to reduce the amounts owed to Gypcraft by c. £200k (and in the absence of any pay less notice) Gypcraft commenced a "smash & grab" adjudication.
The adjudicator found that VCL had failed to serve either a payment notice (as it was late) or a pay less notice in response to Gypcraft's valid interim payment application. VCL was ordered to pay Gypcraft £216,947.75, being the sum notified in the payment application, plus interest of £26,045.76 (the 'award'), in accordance with section 110B(4) of Act.
VCL paid the award, but subsequently sought a declaration from the Court in relation to the proper construction of the payment mechanism used in the Subcontract.
TCC ruling
VCL pleaded that:
- Gypcraft’s interim payment application was invalid, having been issued before the applicable statutory due date (the contractual due date provisions lacking in clarity).
- Gypcraft had historically accepted VCL's payment notices issued later than required by the subcontract and was therefore estopped from denying that VCL's payment notice was effective.
- VCL's payment notice should in fact be treated as a valid pay less notice.
Adrian Williamson KC rejected VCL's case, holding that:
- The subcontract clearly set out dates for submissions, due dates, and notices. It would have been "perverse and uncommercial to hold that the regime could not work as intended".
- Estoppel by convention could not arise – there was no evidence of a shared assumption, reliance by VCL nor convention.
- VCL's payment notice was clearly a payment notice and could not be retrospectively reclassified as a pay less notice – "it would…entirely undermine the Act and the Sub-Contract if what the parties clearly intended at the time to be a Payment Notice could somehow retrospectively be converted into a Pay Less Notice". The Court referred to the findings of Coulson J in Grove Developments Limited v S&T (UK) Limited [2018] BLR 173, specifically that:
"…general guidance applies equally to a payment notice and a pay less notice. Each has to make plain that it is, respectively, a payment notice or a pay less notice. Each has to clearly set out the sum which is said to be due and/or to be deducted, and the basis on which that sum is calculated".
Practical implications for contractors and subcontractors
This case reinforces the importance of strict compliance with statutory and contractual payment provisions, in particular:
- Missing deadlines for payment notices or pay less notices can result in full liability for the claimed amount.
- A payment notice cannot later be treated as a pay less notice. Each notice must be correctly titled and served within the statutory and/or contractual timeframe.
- Historical acceptance of notices issued late does not create an estoppel unless there is clear evidence of a shared assumption and reliance.
- Parties should maintain accurate records of applications, notices, and dates in order to avoid disputes and strengthen their position in adjudication or litigation.
