UK: When Does The Pay Less Notice Regime Apply?

Last Updated: 31 October 2018
Article by Laura Lintott, Akin Akinbode and Gurbinder Grewal

Laura Lintott of Dentons UK and Middle East LLP analyses the pay less notice regime in the wake of last year's Court of Appeal ruling on whether the Construction Act applies to final payment applications made after contract completion or termination.

Key points

  • A review of the decision in Adam Architecture Ltd
  • The Court of Appeal has held that s 111 of the HGCRA 1996 applies to both interim applications and any final account or termination account 
  • An employer cannot resist a payment application without serving a pay less notice – even if the construction contract has been terminated 
  • The employer must pay the sum stated to be due and argue about it afterwards

Late in 2017, the Court of Appeal (CA) was asked to decide whether s 111 of the Housing Grants, Construction and Regeneration Act 1996 (as amended in 2011) (Construction Act), applies to final payment applications made after completion or termination of the contract. Does an employer have to serve a pay less notice if it disagrees with the amount applied for by the contractor? In responding yes to this question, the CA's decision in Adam Architecture Ltd v Halsbury Homes Ltd [2017] EWCA Civ 1735 provides useful clarification on how to interpret s 111 of the Construction Act.

Before relaying the facts of the case, Lord Justice Jackson was careful to set out in full the payment terms covered by ss 109 to 111 of the Construction Act – both the old, 1996 version and the latest, 2011 version. (All sections here refer to the 2011 version of the Construction Act.)

Here is a reminder of the key requirements of s 111 for an employer to serve a pay less notice if it intends to pay less than the notified sum.

Section 111(1) provides:

'Subject as follows, where a payment is provided for by a construction contract, the payer must pay the notified sum (to the extent not already paid) on or before the final date for payment.'

Section 111(3) states:

'The payer of a specified person may in accordance with this section give to the payee a notice of the payer's intention to pay less than the notified sum.'

What was the dispute in the Adam Architecture Ltd case?

Adam Architecture Ltd (Adam), a company of architects, was appointed under a professional services appointment by Halsbury Homes Ltd (Halsbury), a property developer, in connection with a residential development to construct 200 homes in Loddon, Norfolk.

Halsbury accepted Adam's fee proposal to carry out its work in four stages and Adams started work under the Conditions of Appointment for an Architect published by the Royal Institute of British Architects (RIBA) 2012 edition (RIBA Conditions). Their arrangement, however, quickly fell apart.

On 2 December 2015, Halsbury terminated Adam's appointment without notice.

The RIBA Conditions contained a term allowing either party to terminate on notice.

On 3 December 2015, Adam submitted an invoice for £46,239 for work undertaken on parts of all four stages (December Invoice).

Halsbury failed to serve a pay less notice and also failed to pay Adam for work done up until 2 December 2015 under the December Invoice.

In February 2016, Adam commenced an adjudication to recover payment of the £46,239 and a further £747 relating to an earlier invoice dated 21 October 2015.

What did the parties argue in the adjudication?

In the adjudication, Halsbury:

  • Alleged that there was no contract as it came to an end before the invoices were sent.
  • In the alternative, noted that it did not have to serve a pay less notice as the invoice was a final account. Halsbury based this argument on the premise that the payment notices required by the RIBA conditions and the Construction Act did not apply to final applications but only to interim applications for payment. 

The adjudicator's ruling

The adjudicator disagreed with Halsbury and found in favour of Adam, mainly as Halsbury had failed to serve a pay less notice in relation to both of the invoices.

The adjudicator awarded Adam the amount of both of their outstanding invoices, plus interest and costs pursuant to the RIBA Conditions.

What were the arguments in the TCC?

Halsbury did not comply with the adjudication award and both parties issued proceedings in the Technology and Construction Court (TCC).

Halsbury issued a claim under CPR Pt 8 for the following declarations:

  • the Construction Act's pay less regime did not apply to the December Invoice;
  • Halsbury was not liable to pay that invoice; and
  • the adjudicator's decision was unenforceable.

Adam issued a parallel application for summary judgment proceedings under CPR Pt 7 to enforce the adjudicator's decision. The two applications were heard together by Mr Justice Edwards-Stuart.

Adam argued that, as Halsbury had not issued a pay less notice, it was entitled to the full payment of both of its invoices.

Halsbury maintained that by 3 December 2015, the contract had been terminated. Even if it was still in existence, it did not have to serve a pay less notice in relation to the December Invoice as it was a final account.

The High Court's ruling

The first instance judge found in favour of Halsbury and granted all three declarations dismissing Adam's claims. The judge considered the contract to have been repudiated on 2 December 2015 and held that Halsbury was not contractually required to serve a pay less notice because:

  • the contract was discharged and therefore neither party was required to perform its primary obligations (including Halsbury's obligation to serve a pay less notice under the contract); 
  • the December Invoice was a final account (within the meaning of cl 5.14 of the RIBA Conditions) and the invoiced sum was not the 'notified sum' under the contract (as defined in cl 5.14 of the RIBA Conditions); and
  • the December Invoice was a termination account under cl 5.17 of the RIBA Conditions meaning that the invoiced sum was not the 'notified sum' (first sentence of cl 5.14 of the RIBA Conditions). 

Did the Court of Appeal agree with the TCC?

Adam appealed to the CA on three grounds:

  • Section 111 required pay less notices in respect of both interim applications and any final account or termination account.
  • The judge should not have dealt with such a complex issue as repudiation in Pt 8 proceedings.
  • The judge failed to decide the dispute subject to the adjudication.

    At the CA hearing, Halsbury argued that Adam had not relied on the s 111 point in the adjudication, and should not be allowed to do so in court. 

However, Jackson LJ stated (para [40] of the judgment):

'... If this court is dealing with a dispute about payments due in relation to a construction project, it is unrealistic for us to ignore the relevant provisions of the 1996 Act. We must decide the dispute between the parties in accordance with the law. We would do a disservice to the construction industry if we give a judgment which disregards the relevant statutory provisions.'

Jackson LJ accepted that the principal objective of the Construction Act is to maintain the cashflow of contractors and sub-contractors throughout the duration of the project but pointed out that there is no textbook authority stating that s 111 applies only to interim payments. Although s 109 is expressly limited to interim payments, the other sections refer only to 'payments'. Section 109(4) specifically clarifies this position by stating that ss 110 to 111 are wider in their scope than s 109.

Jackson LJ found that s 111 clearly relates to all payments which are 'provided by a construction contract' and is not limited to interim payments. (See para [48] of the judgment.) He refused to imply anything else into the statute.

Jackson LJ went on to review the case law including:

  • Rupert Morgan Building Services (LLC) Ltd v Jervis [2003] EWCA Civ 1563 in which a contractor successfully recovered payment on an interim certificate where the employer had failed to serve a withholding notice (as it was under the 1996 version of the Construction Act) under s 111. The CA discussed the impact of s 111 on both interim and final certificates noting that it was fundamentally about cashflow: it does not seek 'to make any certificate, interim or final, conclusive. In other words ... the employer must pay the sum stated to be due and argue about it afterwards'. Jackson LJ pointed out that irrespective of the fact that Rupert Morgan relates to the old version of the Construction Act, the reasoning makes good sense holding that a contractor is entitled to refer issues concerning interim payments or the final account to adjudication.
  • Melville Dundas Ltd (in receivership) v George Wimpey UK Ltd [2007] UKHL 18 (also on the 1996 version of the Construction Act) in which both parties accepted that s 111 applied to both interim and final certificates.
  • Harding (t/a MJ Harding Contractors) v Paice [2015] EWCA Civ 1231 (which dealt with the 2011 version of the Construction Act) in which the adjudicator had ordered the employer to pay the full amount due on the contractor's final account under s 111 as the employer had failed to serve a valid pay less notice. Both parties accepted that s 111 applied to final certificates as well as interim certificates. The CA held that the employer had to pay the full amount and argue about the figures later 

Jackson LJ concluded that s 111 applies to both interim and final applications for payment. Therefore, Halsbury should have served a pay less notice if it wished to resist paying Adam's final account or termination account. The judge further held that the December Invoice was an account following termination pursuant to cl 5.17 of the RIBA Conditions. It was, therefore, a claim for money due under the contract and not a claim for damages for breach of contract. Accordingly, Adam had the benefit of the Construction Act's payment regime and could recover payment on both outstanding invoices. It had not accepted any repudiatory breach but treated Halsbury's email dated 2 December 2015 as a termination of the engagement. 

The CA therefore allowed Adam's appeal, dismissed Halsbury's Pt 8 proceedings and gave summary judgment in favour of Adam in the Pt 7 proceedings.


Adam Architecture Ltd disposes of any distinction in the requirement to serve a payment notice between interim and final applications. Section 111 of the Construction Act and the requirement to serve a pay less notice applies to interim and final payments as well as payments due following completion or termination of a contract.

One further point on the repudiation: Adam did not accept any repudiatory breach but instead treated Halsbury's email dated 2 December 2015 as a termination of the engagement without the appropriate notice. It immediately stopped work and notified Halsbury that it was doing so. Had the CA upheld the repudiation point, the appeal may have been unsuccessful as it is arguable that both parties have been discharged from their primary obligations under the RIBA Conditions, including any obligations imposed by the Construction Act.

The practical significance is clear: if employers believe final payments and those applied for after completion or termination of the works are not due, they must serve a pay less notice. Failure to do so will mean the sum becomes payable in full and, if it is not paid, the contractor will likely obtain an adjudication decision in its favour ordering payment.

This article was first published in Construction Law on 2 October 2018.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Goodman Derrick LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Goodman Derrick LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions