Can a late Payment Notice be treated as a Pay Less Notice: Vision Construct v Gypcraft?

Overview

In Vision Construct Ltd v Gypcraft Drylining Contractors Ltd [2025] EWHC 2707 (TCC), the Technology and Construction Court (the TCC) considered whether a document originally issued and intended to be a payment notice can be retrospectively converted into a pay less notice (PLN).

Background

On 12 November 2020, Vision Construct Limited and Gypcraft Drylining Contractors Ltd entered into an amended JCT Design and Build Sub-Contract 2016 with a bespoke payment schedule. The payment schedule set out the agreed interim payment dates but only up until 2 February 2021. As Gypcraft was scheduled to start the Works between 1 December 2020 and 31 January 2021, the schedule was practically redundant shortly after execution. Vision addressed this by later issuing three payment schedules which each set out the dates for applications, payment and notices.

On 16 January 2023, Gypcraft issued its interim application for payment number 23 (AFP 23), in the sum of £342,385.52. Vision responded after the date the payment notice was due via an email titled “Payment Notice”. The email stated that the sum due to Gypcraft was £125,437.77, which Vision then paid. At no point was a PLN ever sent to Gypcraft. Gypcraft then commenced a ‘smash and grab’ adjudication in October 2024 seeking payment of the outstanding £216,947.75 as a notified sum.

Adjudication Decision

The adjudicator found in favour of Gypcraft, concluding that the email was invalid as a pay less notice and, therefore, Gypcraft was entitled to the notified sum plus interest.

Part 8 Proceedings

Vision paid the notified sum but issued Part 8 proceedings. Part 8 proceedings are an alternative, streamlined court process for the courts to determine straightforward legal questions unlikely to involve substantial factual disputes, like contract interpretation or declaration on a legal point. As adjudications are only binding in the interim, Vision sought to overturn the adjudicator’s decision on the grounds of an incorrect interpretation of the subcontract’s payment mechanism. This was, in effect, attempting another bite at the cherry.

Vision advanced three arguments:

• As the dates for payment in the subcontract were unclear, AFP 23 was invalid as it was issued before the statutory due date, applying the Scheme for Construction Contracts;
• Estoppel prevented Gypcraft from rejecting the email as a payment notice because it had previously accepted other late payment notices (applications 20, 21 and 22 were all dealt with out of time); and
• The email should be treated as a valid PLN.

Decision

The TCC dismissed Vision's claim in its entirety, addressing each of Vision’s arguments as follows:

• The dates for payment in the Subcontract were sufficiently clear. It said that “[it] would be perverse and uncommercial to hold that the regime could not work as intended” simply because certain terms in the payment schedule were not referred to by their ordinary nomenclature despite their underlying meaning being clear.
• Estoppel did not arise as there was no evidence of a convention permitting late payment notices and, as such, Vision could not seek reliance on it. In any case, determining whether a convention had arisen would require an interrogation of the facts which would be inappropriate for Part 8 proceedings.
• Vision’s email was clearly a payment notice and not a PLN, as it would “…entirely undermine the Act and the 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”.

Broader Takeaways when Approaching the Payment Regime

This case follows an extensive line of case law which adopts a common-sense approach to the payment regime under the Housing Grants, Construction and Regeneration Act 1996 (Construction Act). The key themes which have emerged are:

Timing is Key

The courts continue to robustly enforce the payment regime under the Construction Act: the paying party must first pay the notified sum before pursuing a true value adjudication (the Grove principle). The TCC may be willing to stay enforcement proceedings in the limited scenario of an impecunious claimant being unable to repay the adjudication sum if the issue is determined in the other party’s favour. It is crucial to issue a valid payment notice and/or PLN on time. 

No Unduly Legalistic Interpretation

The courts will not be impressed by parties seeking to condemn a notice on an artificial or contrived basis. The construction of the notices under the Construction Act must be approached objectively. The issue is how a reasonable recipient would have understood the notices.  For a more detailed view, see our commentary in relation to the recent case of Placefirst Construction v CAR Construction (North East) Limited [2025] EWHC 100 (TCC); see also Advance JV v Enisca Ltd [2022] EWHC 1152 (TCC)).

Substance over Form

All PLNs must objectively communicate the sum that the payer considers to be due on the date the notice is served and the basis on which that sum is calculated – ignoring any overly technical criticisms (see our commentary on this point in relation to RBH Building Contractors Ltd (“RBH”) v Ashley James & Anor [2025] EWHC 2005 (TCC); see also Advance JV v Enisca Limited [2022] EWHC 1152 (TCC)).

Genuine Belief in the Sum Specified

The payment notice or PLN should accurately state the sum which the payer “considers to be due” rather than adopting a practice of issuing a notice for a nominal value to gain time in order to later make a more detailed assessment; otherwise the payment notice or PLN risks being held invalid. (see Downs Road Development LLP v Laxmanbhai Construction (UK) Limited [2021] EWHC 2441 (TCC)).

You can read the judgment from Vision Construct v Gypcraft in full here.