A recent adjudication has reinforced the principle that if a client does not submit a timely payment notice, he will have to pay the full amount that the contractor requests in his application for payment.
ISG Construction v Seevic College – The facts of the case
Seevic College engaged ISG Construction to carry out works under a JCT design and build contract with monthly interim payment applications specified. ISG carried out some of the works and submitted an application for £1.09 million, which Seevic then failed to pay, and more importantly, failed to issue a payment notice against. ISG brought adjudication proceedings which confirmed they were owed the full amount. But just before judgement was issued on this, Seevic, knowing that the amount in the payment application was far in excess of what was owed issued their own adjudication for the valuation of the actual works carried out. This adjudication found the sum owed to ISG was £800k less than what was requested in the interim payment application. Seevic then paid ISG the actual amount, but was ordered to pay the additional £800k to the contractor by the original adjudication because of their failure to issue a payment notice.
The court here underlined the integrity of the intention of the Construction Act 1996 for payment notices to dictate what was actually owed. Even though the actual valuation of the works was far less than the sum requested by the contractor, because the client did not follow protocol and issue a payment notice they had to pay the full amount requested.