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Introduction

This case concerns a payment dispute between BHDL (“the Employer”) and a construction contractor (“our client”) engaged under a JCT Design and Build 2016 Contract, amended slightly to adjust key dates. The dispute highlights the critical role of statutory payment regimes under the Housing Grants, Construction and Regeneration Act 1996 (as amended) and the strategic use of adjudication — particularly “smash and grab” adjudications — in securing interim payments. The contractor’s claim focused on the Employer’s failure to issue a valid Payment Certificate or Pay Less Notice in response to Interim Payment Application 23, valued at approximately £150,000.

Background

Our client was engaged to demolish existing properties and construct twelve new flats on the a Leeds site. The contract was based on the JCT Design and Build 2016 form, incorporating amendments to the standard payment timelines — notably, extending the final date for payment from 14 to 21 days after the due date.

On 1 November 2024, our client submitted Interim Payment Application 23, assessing the value of works up to that date at approximately £146,000. In line with the JCT contract, this triggered the statutory payment process:

• Due Date: 6 November 2024 (five days after the application).
• Final Date for Payment: 27 November 2024 (21 days after the due date, per contract amendment).
• Pay Less Notice Deadline: 20 November 2024 (seven days before the final payment date).

The Employer failed to issue either a Payment Certificate within five days of the due date or a valid Pay Less Notice seven days before the final date for payment. The Payment Certificate was eventually issued on 29 November 2024, which was two days after the final payment date and thus non-compliant.

Legal Framework

The relevant statutory regime — as laid down in the Housing Grants, Construction and Regeneration Act 1996 — mandates clear procedures for interim payments in construction contracts:

1. Payment Application: Submitted by the contractor, assessing the value of works done.
2. Payment Certificate (or Employer’s Payment Notice): Must be served within five days of the due date.
3. Pay Less Notice: If the Employer wishes to pay less than the claimed amount, a valid Pay Less Notice must be issued no later than seven days before the final date for payment.

Failure to comply with any of these requirements gives rise to an automatic right for the contractor to be paid the full amount claimed in the application, regardless of the actual value of work performed. This statutory protection ensures cash flow in the construction industry — essential for the survival of contractors and subcontractors.

Smash and Grab Adjudication

Given the Employer’s failure to meet the procedural requirements, our client initiated a “smash and grab” adjudication. This form of adjudication focuses solely on procedural non-compliance — specifically, the absence of a valid Payment Certificate and/or Pay Less Notice — and does not require the adjudicator to consider the substantive value of the works.

A Notice of Adjudication was issued, and the Royal Institution of Chartered Surveyors (RICS) was requested to appoint an adjudicator. The adjudicator is expected to review:

• The date and content of Interim Payment Application 23.
• The timing and validity of the Employer’s Payment Certificate and Pay Less Notice.
• Compliance with contractual and statutory deadlines.

Given the Employer’s failure to issue timely notices, our client is entitled to the full amount claimed. Interest at a contractual rate of 5% above the Bank of England base rate is also sought, estimated at around £4,000, adding to the enforceable total.

Strategic and Commercial Considerations

While the payment claim under Adjudication 23 may appear modest (~£150,000), it holds significant strategic value:

• It secures cash flow for our client, enabling them to cover legal costs and fund further dispute resolution.
• It places financial pressure on the Employer, who risks a winding-up petition if they fail to comply with the adjudicator’s decision.
• It sets a tactical precedent in a broader financial dispute — the contractor claims they are owed £700,000, while the Employer alleges a counterclaim.

This adjudication is a calculated move to establish leverage ahead of final account negotiations or potential litigation. Importantly, the Employer has not missed deadlines related to the final account, so this immediate claim offers our client the opportunity to build a financial “war chest” and shift the balance of power.

Practical Insights

• Deadlines Are Critical: Payment regimes under JCT contracts are unforgiving. Missing a Payment Certificate or Pay Less Notice deadline can result in automatic liability to pay the full application sum — regardless of the true valuation.
• Contract Amendments Must Be Understood: The standard 14-day final payment window was amended to 21 days here. Both parties must carefully track any contractual adjustments to statutory frameworks.
• Document Management Is Key: Email records, submission logs, and evidence of service dates are central to proving compliance or default.
• Adjudication as a Strategic Tool: “Smash and grab” adjudications provide a rapid and cost-effective remedy to payment disputes. They are especially valuable when cash flow is tight, and final account resolution is months away.
• Commercial Diplomacy Has Limits: Our client initially held off on adjudication to preserve relations — but ultimately had to protect their legal and financial position. Timing the move correctly is essential.
• Enforcement Must Be Understood: Once the adjudicator’s decision is issued, non-payment enables the contractor to seek summary judgment or even initiate insolvency proceedings.

Conclusion

The BHDL dispute is a textbook example of how missed deadlines in construction contracts can lead to significant financial exposure. This matter demonstrates the importance of precision, compliance, and tactical adjudication in managing contractual disputes under JCT contracts and the Construction Act.

For legal teams and construction professionals, it reinforces the need for disciplined contract administration, robust internal tracking of key dates, and a clear understanding of adjudication strategy. Used effectively, adjudication is not merely a procedural remedy — it is a powerful commercial weapon.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

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