Call us on 01242 224433

Insights

Construction & Engineering

Pay now: argue later

The concept of “withholding notices” is not new to the world of construction.  In fact, even the re-branded “pay less notice” is not new: it has applied to all commercial construction contracts since 1 October 2011.  Most industry standard construction contracts even have a contractual mechanism for pay less/withholding notices. 

Why (oh why) then, do so many employers/contractors fail to serve such notices and then fail to pay on time?  More to the point, when the payee is not paid, and there has been no such notice, why (oh why) do they fail to act? 

I currently have no less than three active files where the nub of the problem is a failure to pay: and in all three cases, there have been no pay less notices served.  In all three cases the HGCRA applies and in all three cases there was a clear contractual mechanism, patently breached by the employer/contractor.  Furthermore, in all three cases, there was a contractual right to interest (and given that all three cases involve decent six-figure sums, the daily rate of interest was akin to a construction labourer’s daily wage).

Far be it from me to encourage an unnecessary fight (any lawyer worth their road grit will encourage their client always to bear in mind the long term commercial picture) but when the Act is clear and the contract is clear, there can be no defence. 

Those who have not been paid are perfectly entitled to serve a Statutory Demand on their employer and demand payment within 21 days.  Continuing failure to pay entitles them to commence Winding Up proceedings.  Moreover, unpaid (sub)contractors are entitled to suspend their works upon 7 days’ notice and should give such notice straight away, before the debt gets worse. 

The unpaid party may suspect that their employer will dispute the sums owed.  That may be true.  However, in the absence of a pay less notice (and in the absence of a contractual right of abatement – let’s leave that for another day) the employer MUST “pay now, argue later”.

The UK construction industry lobbied the government for a stronger construction Act and got one: the armoury is better stocked than ever before.  If payment remains a problem, payees need to use the ammunition they have and do something about it. Speak now or it’s your own cashflow that suffers. 

 

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice. 

 

 

Get in touch