Loose interpretation of Pay Less Notices

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Surry and Sussex NHS Trust v Logan Construction [2017] Building Law Reports TCC, Deputy High Court Judge Nissen

Facts

The Trust received an interim payment notice on 20 September claiming £1.1m. (This was during intense negotiations on valuation generally between the parties).  The Trust’s response was to produce a Final Certificate showing a gross valuation of £4.9m, with detailed supporting calculations showing that the Trust considered that £14,000 was all that was due on an interim basis.

Logan went to adjudication alleging that had it served an interim payment notice and had not received a responding Notice to Pay Less.  The adjudicator agreed, and ordered payment of £1.1m.

The Trust made the payment but then sought a declaration from the High Court that its Final Certificate correspondence counted as a Notice to Pay Less.

Held:

  1. Although the primary function of the communication from the Trust was to issue the Final Certificate, it was possible for one document to serve 2 different purposes; and the email contained all the information necessary to put a reasonable recipient on notice of the interim amount which the Trust proposed to pay and the basis on which that sum had been calculated.
  2. Although the communication was an email, sent by the Trust’s surveyor to the Trust and merely cc’d to Logan, this was nevertheless sufficient to constitute notice to Logan. A notice does not have to be addressed to the recipient!
  3. The meaning and effect of this document as a notice was to be determined by asking oneself what “the reasonable recipient” would have understood the communication to mean? The Judge ruled that a reasonable recipient would have understood that in producing a final certificate the Trust and its surveyor were carrying out a valuation of all the relevant aspects, and thus notifying their take on the value of the interim payment.

Comment

The Court took a very common sense approach.  Although the Final Certificate communication was not labelled as a notice to pay less, jargon was not important; the substantial effect, and the underlying and obvious intention were.  Using the concept of interpretation by reference to a “reasonable recipient” the concept of reasonableness has been reinforced again.  This is a helpful, consciously “un-legalistic” approach which should be helpful in avoiding unnecessary disputes.

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