Introduction
Charles Edwards, high performing Construction Barrister, reviews the Technology and Construction Court (“TCC”) case of Vision Construct Ltd v Gypcraft Drylining Contractors Ltd [2025] EWHC 2707. The key issue in this case involved the proper construction of the payment mechanism in a JCT Design and Build Subcontract 2016 (“the JCT Sub-Contract”) in relation to a Payment Notice and a Payless Notice in respect of Interim Application 23. This is an issue involving payment which is widespread within the construction industry, i.e. the proper construction of a contract payment mechanism, payment notice and payless notice.
Vision Construct Ltd (“the Claimant”) commenced Part 8 proceedings against Gypcraft Drylining Contractors Ltd (“the Defendant”) following an adjudicator’s decision in favour of the Defendant in the sum of £216,947.75 plus interest in relation to the Defendant’s Interim Payment Application 23. The Claimant sought declarations as to the correct construction of the contract payment mechanisms in the parties’ JCT Sub-Contract.
Factual Background
The adjudicator’s decision was on the following basis:
“…
(a) Gypcraft had served a valid Interim Payment Application 23;
(b) VCL had failed to serve either a Payment Notice or a Pay Less Notice in response as required; and
(c) therefore Gypcraft’s Interim Payment Application 23 was payable in the amount applied for, in accordance with section 110B(4) of the Housing Grants, Construction & Regeneration Act 1996 (“the Act”)…”
[paragraph 2 of the Judgment]
The Claimant complied with the adjudicator’s decision but nevertheless asserted that the adjudicator’s decision was wrong and sought declarations to set aside the decision in seeking to be repaid the sums which it had paid to the Defendant. To summarise the Claimant’s case [paragraphs 3 and 33 of the Judgment]:
“3. …
1) The Subcontract fails to adequately identify a relevant “Interim Valuation Date” for Payment Cycle #23, meaning that clause 4 must be substantially re-written by Part II of the Scheme. The necessary modifications to clause 4 mean there was no right in Gypcraft to submit Interim Payment Application #23 before that (new, statutorily imposed) due date. This argument is not pleaded, but it requires no disputed evidence. It is purely a matter of submission to be argued on the construction of the documents.
2) There was a course of conduct between the parties under which a convention arose that Gypcraft would accept VCL’s Payment Notice #23 out of time. This involves looking how the parties treated the other payment cycles. VCL attaches to this skeleton a table which demonstrates that for almost the entirety of 2021, 2022 and 2023 (that is, both before and after Payment Cycle #23 in January 2023) Gypcraft accepted Payment Notices issued out of time; issued invoices seeking payment of VCL’s notified sum; and took those net sums without complaint or any meaningful, clear reservation. Gypcraft are therefore estopped by convention from denying that Payment Notice #23 was effective to set the notified sum for that payment cycle. All of the evidence on this point comes from the documents; it does not require live evidence.
3) Lastly, if VCL’s Payment Notice #23 was out of time to serve as a payment notice, it was (indisputably) nevertheless in time to serve as a Pay Less Notice. It contained all the relevant information to communicate to Gypcraft that VCL intended to pay less than the amount applied for, with a breakdown of why that was. That being all the Subcontract and the HGCRA96 requires, there is no reason not to read the Payment Notice as a Pay Less Notice. Again, this is a pure point of construction on the documents.”
[Emphasis added]
33. …
“(d) The estoppel by convention referred to above is found in, and/or arose by reason of the parties communications across the line, objectively construed, as found in the interim payment applications, the payment notices, and the invoices (including for the avoidance of doubt the subsequent interim payment applications) in which Gypcraft represented to VCL that the net summary position as at the start of that payment cycle was to be found only in the gross value of the work done less the amounts invoiced by Gypcraft in accordance with the previous payment cycles. In particular, by those representations Gypcraft impliedly represented there were no other notified but uninvoiced sums which had to be taken into account when assessing movement in the month (i.e. since the time of the last valuation). VCL relied on that convention when it took up, assessed and valued Gypcraft’s applications submitted on that basis, such that it would be unconscionable for Gypcraft to withdraw from that convention with retrospective effect and for Gypcraft to claim payment of its interim payment application 23 on the basis that that sum has self executed in the amount claimed.”
[Emphasis added]
The Claimant issued a series of updated Payment Schedules which provided columns giving dates for the following:
“…
i) Sub-Contractor Submission Valuation Date;
ii) DUE date (sic) ;
iii) Accounts to issue Payment Notice by;
iv) Payless Notice to be issued by;
v) Final date for Payment.
Footnote 4 stated that “all Applications for Payments and Invoices are to be issued to [email address] by end of business on the Valuation date above”.
Relevant Provisions in the Contract
The relevant provisions of the JCT Sub-Contract included the following relevant terms:
“…
i. Clause 4.6.1 provided that the monthly due dates for interim payments were to be 21 days “after the relevant Interim Valuation Date”;
ii. Clause 4.6.3 stated that “… the Sub-Contractor may make a Payment Application in respect of an interim payment to the Contractor…not later than 4 days prior to the Interim Valuation Date”;
iii. Clause 4.7.1, as amended, set the final date for payment as 21 days after the due date;
iv. Clause 4.7.2 required that “Not later than 5 days after the due date in each case the Contractor shall give a notice to the Sub-Contractor which shall specify the sum that he considers to be or have been due at the due date and then basis on which that sum has been calculated (a ‘Payment Notice’) …”
v. Clause 4.7.3 provided that “Subject to any Pay Less Notice given by the paying party under clause 4.7.5, the paying Party shall pay the sum specified in the Payment Notice…on or before the final date for payment. If the Contractor fails to give a Payment Notice…in accordance with clause 4.7.2, but a Payment Application has been or is then made, the Contractor shall, subject to any Pay Less Notice given under clause 4.7.5, pay the sum specified in the Payment Application”;
vi. Clause 4.7.5.1 stated that “Where the Contractor intends to pay less than the sums stated in the Payment Notice…. the Party by whom the payment is stated to be payable shall not later than 1 day before its final date for payment give the other Party notice of that intention in accordance with clause 4.7.6 (a ‘Pay Less Notice’). Where a Pay Less Notice is given, the payment to be made on or before the final date for payment shall not be less than the amount stated in it as due.”
vii. Clause 4.7.6 provided that “A Pay Less Notice given by either Party shall specify the sum he considers to be due to the other Party at the date the notice is given and the basis on which that sum has been calculated.””
Part 8 Proceedings
The Court pointed out that CPR Part 8 was only appropriate where the Claimant “seek[s] the court’s decision on a question which is unlikely to involve a substantial dispute of fact.” Claims involving estoppel are generally not suitable for Part 8. In ING Bank NV v Ros Roca SA [2012] 1 WLR 472, the Court of Appeal explained at [77] that:
“In general Part 8 proceedings are wholly unsuitable for the trial of an issue of estoppel. Once such a claim is disputed, save in exceptional cases, the proceedings will cease to comply with CPR r 8.1(2)(a), since they will cease to be proceedings in which the parties do not seek the court’s decision only on questions which are unlikely to involve a substantial dispute of fact. A disputed claim of estoppel should be carefully pleaded.”
The Defendant issued its Interim Application for Payment Number 23 seeking payment of £342,385.52 on 16th January 2023. The Claimant purported to issue a Payment Notice on 7th February 2023, stating that the sum due to the Defendant was £125,437.77, which the Claimant paid. The document issued by the Claimant had a covering email with the words “Payment Notice” and stated on its face to be a Payment Notice. This was issued late by the Claimant (5 days after the Payment Notice date) and the Claimant also failed serve a separate Payless Notice. The Defendant commenced adjudication proceedings in October 2023 seeking the outstanding sum under Interim Application 23 in the sum of £216,947.75 as a notified sum. The adjudicator found in favour of the Defendant and awarded £216,947.75 plus interest to be paid by the Claimant. A final reformulated amendment set out the position as follows:
“10A. The 2022-23 Payments Schedule:
(a) Was an instruction given by VCL under, and not a variation to the Subcontract.
(b) Had therefore to be read subject to the Subcontract, and in particular subject to clause 4 of the Subcontract.
(c) Did not set out a clear and transparent regime setting out what sums became due and when for the purposes of clause 4 of the Subcontract. In particular, the 2022-23 Payments Schedule did not set out any (alternatively any clear and unambiguous) Interim Valuation Dates for the purposes of continuing the interim payment regime beyond the dates set out in Numbered Document 6 to the Subcontract, meaning that the Scheme for Construction Contracts (England & Wales) Regulations 1998 (SI 649/1998) applied to fix the relevant (valuation) periods instead. That in turn meant that (so long as the 2022-23 Payments Schedule applied) there was no relevant right under the Subcontract to submit a contractually-compliant application pursuant to clause 4.6.3.1 as had otherwise been the case;
(d) Alternatively, contemplated Gypcraft’s interim payment applications were to be submitted on the interim valuation date, and not 4 days in advance of it, meaning that any applications submitted in accordance with the 2022-23 Payments Schedule would not be submitted in accordance with the Subcontract;
(e) Therefore on either basis the Subcontract at all material times (whether as amended, varied or supplemented by the 2022-23 Schedule) was not (or was no longer) a contract which required or permitted Gypcraft to submit an application within the meaning of s110B (4) of the Housing Grants, Construction & Regeneration Act 1996.”
The TCC’s initial observation was that this argument was very technical and would have the practical result that the payment regime would not work as intended by the Act and the JCT Sub-Contract. Further, the TCC stated that it does not necessarily mean that the argument is wrong, but the court is, in my view, entitled to approach this part of this case with some scepticism. The TCC quoted Coulson LJ in Bennett Construction Ltd. v CIMC MBS Ltd. [2019] BLR 587 at [42]:
“the courts expect the parties to adopt business common sense as to the arrangements for invoicing and payment.”
To summarise the position, this argument meant that it was not possible to read together clause 4 and the 2022/3 and subsequent Schedules for the Defendant to give “such notification with the contract” as contemplated by section 110B(4)(b) of the Act. The Court disagreed.
The Court reviewed the relevant legal ingredients of the type of estoppel asserted by the Claimant, as set out in Mears Limited v Shoreline Housing Partnership Limited [2015] EWHC 1396 (TCC), 160 ConLR 157 at [49] and found that such an estoppel could not arise in the present case:
“(a) An estoppel by convention can arise when parties to a contract act on an assumed state of facts or law. A concluded agreement is not required but a concluded agreement can be a ‘convention’.
(b) The assumption must be shared by them or at least it must be an assumption made by one party and acquiesced in by the other. The assumption must be communicated between the parties in question.
(c) At least the party claiming the benefit of the convention must have relied upon the common assumption, albeit it will almost invariably the case that both parties will have relied upon it. There is nothing prescriptive in the use of ‘reliance’ in this context: acting upon or being influenced by would do equally well.
(d) A key element of an effective estoppel by convention will be unconscionability or unjustness on the part of the person said to be estopped to assert the true legal or factual position. I am not convinced that ‘detrimental reliance’ represents an exhaustive or limiting requirement of estoppel by convention although it will almost invariably be the case that where there is detrimental reliance by the party claiming the benefit of the convention it will be unconscionable and unjust on the other party to seek to go behind the convention. In my view, it is enough that the party claiming benefit of the convention has been materially influenced by the convention; in that context, Goff J at first instance in the Texas Bank case described that this is what is needed and Lord Denning talks in these terms.”
Payment Notice and Pay Less Notice
Further, on the issue of Payment Notices and Pay Less Notices, the Claimant submitted that their document issued on 7th February 2023 in response to Interim Application No. 23 was in fact a Pay Less Notice in accordance with Clause 4.7.5.1 of the JCT Sub-Contract. This assertion the TCC stated was “an ambitious submission” in circumstances where the covering email stated “PN 23” and the body of the email twice referred to “Payment Notice” and the attached document was headed “Payment Notice” and stated the basis on which the sum stated in the Payment Notice was calculated as set out in the breakdown attached therein. The TCC, had no doubt in concluding that the document issued by the Claimant was what it said it was: a Payment Notice, applying the helpful summary on the approach to contractual notices set out at para 47 of Advance JV v Enisca Ltd [2022] EWHC 1152 (TCC) and “any other reading of the document would be entirely artificial”.
Finally, the TCC was of the view that it would entirely undermine the Act and the JCT Sub-Contract if what the parties clearly intended at the time to be a Payment Notice could somehow retrospectively be converted into a Pay Less Notice. The court further quoted Coulson LJ: “As Coulson J (as he then was) observed in Grove Developments Limited v S&T (UK) Limited [2018] BLR 173 at [29]:
“In my view, that general guidance applies equally to a payment notice and a pay less notice. Each has to make plain that it is, respectively, a payment notice or a pay less notice. Each has to clearly set out the sum which is said to be due and/or to be deducted, and the basis on which that sum is calculated. Beyond that, the question of whether or not it is a valid notice in accordance with the contract is a matter of fact and degree.”
Conclusion
In conclusion, ultimately, any party relying on estoppel to challenge or uphold a payment application or payment notice must be able to demonstrate each constituent element, and such arguments may not be well-suited to determination via Part 8 proceedings. This case more importantly, makes the point that Payment Notices and Pay Less Notices operate as distinct mechanisms and a Payment Notice cannot retrospectively be converted into a Pay Less Notice.
The above is for general information only and to encourage discussion and does not constitute legal advice. The author does not assume any responsibility for the accuracy of any statements made and appropriate legal advice should be taken in each instance and relied upon before taking or omitting to take any action in respect of any specific matter.
Charles Edwin Edwards MSt(Cantab) MSc(Lond) MCIArb MRICS FCInstCES Barrister
New Temple Chambers
30 St Mary Axe (The Gherkin)
London EC3A 8BF
28th November 2025
charles.edwards@newtemplechambers.com
For further information with regard to the resolution of any construction, engineering or infrastructure dispute and issues as set out above, please do not hesitate to contact, Charles Edwards, high performing Construction Barrister and Head of Chambers at New Temple Chambers to see how chambers can assist you or your organisation.
