A recent High Court ruling in Placefirst Construction Ltd v Car Construction (North East) Ltd [2025] EWHC 100 has provided clarification on the validity of payment notices and payless notices under the Construction Act and JCT 2016 design and build subcontracts.
The case untangles key issues around timing, interpretation, and compliance with statutory requirements.
Can a payless notice be served before a payment notice?
At the heart of the dispute was whether a payless notice was valid when served before the payment notice to which it referred.
The subcontractor argued that it was premature and therefore invalid. However, the court ruled that the payless notice was valid because:
- The contractor had not issued a valid payment notice.
- The subcontractor’s interim payment application met the criteria for a payment notice under Section 110A(3) of the Construction Act.
- The timing of the subcontractor’s application meant the payless notice did not breach Section 111(5)(b) of the Act, which prohibits serving a payless notice before the relevant payment notice.
Deficiencies in JCT subcontract wording
The court also scrutinised clause 4.6.2 of the unamended JCT standard subcontract. This clause requires a subcontractor’s payment application to state the sum that will become due at the due date.
The ruling found that this does not comply with Section 110A(3)(a) of the Construction Act, which requires payment applications to state the sum due at the time of the notice, not a future amount.
This interpretation means that under standard JCT contracts, subcontractors should ensure their applications clearly align with the Construction Act to avoid potential disputes over validity.
In a further important clarification, the court confirmed that:
- There is no statutory requirement for both a payment notice and a payless notice to be issued.
- However, both can be issued at the same time provided they are distinct documents with separate formal functions under the contract.
In this case, a separate valuation and payment certificate was sent alongside the payless notice.
The court ruled that, when objectively analysed, this document was intended to operate as a valid payment notice, distinct from the payless notice.
What does this mean for you?
This ruling reinforces the importance of precise contract drafting and careful compliance with statutory payment processes under the Construction Act.
For contractors and subcontractors navigating payment disputes, ensuring that notices are properly structured and timed can mean the difference between a smooth payment process and a costly legal battle.
If you have any concerns about your payment procedures or contract terms, our Construction Law team is here to help.
Get in touch for expert legal guidance on navigating payment disputes, contract compliance, and Construction Act obligations.