Problem: I am a contracts manager for a plastering company and in mid-2012, we were successful in our bid on a great project which involved the repair and renovation of a stately home and our order value was just over £200,000.
Only after a few weeks on the job, we started to receive instructions for additional works, the value of which were quite significant. The terms of our sub-contract allowed for monthly valuations, of which we had to get our own claim in by 28th of the month. However, about 3 months into the project, the contractor’s quantity surveyor started to question our account quite aggressively and in March of this year, refused to value the works, saying in an email that he disputed the work claimed and the value of our variation account, and considered that we had been actually been overpaid.
In our March application, the gross sum claimed was approximately £124,000, whilst the net value was £27,000. Obviously I am quite concerned, especially as we are still expending monies. What can we do?
Stefan, Hucknall.
Response: Hello Stefan. In October 2011, the Housing Grants, Construction and Regeneration Act 1996 was amended by the Local Democracy, Economic Development and Construction Act 2009 (“the New Construction Act”), and this gave considerable more power to the payee (the party receiving the monies). One of the amendments now requires all contracts (that were entered into after 1 October 2011), to have fixed due dates (as opposed to a decision by any person as to whether obligations under another contract have been performed).
The New Construction Act also includes section ‘110B notice’, where if the contract permits or requires the payee to make a claim before the date when the payer issued a payment notice, but the payer failed to issue a payment notice on time, then the payee’s application becomes the payment notice in default.
I would therefore recommend that you calculate the dates for the payment and payless notices against your March 2013 application, and if none has been issued (and I doubt that the email from the quantity surveyor would be regarded as notices), then your application will be become the payment notice in default, and if payment for the full amount claimed is not forthcoming, you can refer the matter to adjudication.
Further, because you have not been paid (although you must check the payment period under your contract), then you can issue a notice of intention to suspend operations, after which time if no payment has been received, you can then suspend all work until payment is received.
© Michael P. Gerard MSc, PGDipLaw, PGDipBar, FCIOB, MCIArb, MAE
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.
Author background
Michael is a Barrister, Chartered Builder, Registered Adjudicator & Accredited Expert in quantum and planning matters. He is Managing Director of Michael Gerard & Co www.michael-gerard.co.uk, a company of chartered building consultants and quantity surveyors who provide a specialised service in the areas of construction law, quantum, programming, business recovery and insolvency support to the construction industry. Michael is also a consultant with Silver Shemmings LLP, a London practice of solicitors specialising in construction.