When one notice fails: why a defective payment notice does not invalidate a pay less notice

The construction industry’s payment regime is notoriously unforgiving. Strict deadlines, precise drafting, and full technical compliance determine whether money must be paid or can be withheld.

The recent decision in Laing O'Rourke Delivery Ltd v Shepperton Studios Ltd [2026] EWHC shows that we in fact have a more pragmatic judicial approach: a defective Payment Notice does not automatically invalidate an otherwise valid Pay Less Notice. Significantly, a "smash and grab" claim, can be mitigated by a valid Pay Less Notice, even if the preceding payment notice is deemed invalid.

This judgment concerns Laing O’Rourke Delivery Ltd (“LOR”) seeking to enforce an Adjudication Decision which found that both a Payment Notice and a Pay Less Notice were invalid, deciding that Shepperton Studios Ltd (“SSL”) must pay the full sum of circa £5.6m + VAT and interest.

In separate proceedings listed to be heard in April 2026, SSL has applied for declarations that the Adjudicator’s decision was wrong when the notices are read properly and in their factual context.

Background to the case

• LOR submitted AFP45, an interim application for payment seeking payment of circa £5.6m.

• SSL issued a Payment Notice in response, valuing the works at circa £2.4m. The gross valuation was not broken down and did not make reference to any other document in which the calculation could be seen.

• SSL then issued a Pay Less Notice that deducted a further £2.42 million, resulting in a notified sum of £0, accompanied by detailed breakdowns explaining how each deduction was calculated.

• LOR did not dispute the calculations in SSL's Pay Less Notice but argued that because those deductions were made from the notified sum in an invalid Payment Notice, the Pay Less Notice was necessarily invalid as well.

• The Adjudicator decided that both SSL's Payment Notice and SSL's Pay Less Notices were invalid and consequently, that SSL must pay the full sum claimed in AFP45 plus interest.

Pay now argue later?

As to process, the usual expedition of the Part 7 enforcement proceedings applied, but the Court specifically stated (without prejudging the outcome of such arguments) that SSL would not be prevented from arguing its position that the adjudicator had made a clear error in defending the summary judgment application. The Part 8 declaratory proceedings were listed to be heard approximately 1 month after the enforcement proceedings.

Unusually, the Part 8 proceedings, seeking a declaration that the adjudicator had made a clear error, were issued even before the adjudicator had issued his decision. Despite that, it was clear to the court that the Part 8 proceedings reflected the arguments advanced in the enforcement proceedings – concerning the validity of Payment Notice 45 and Pay Less Notice 45.

SSL submitted defences to the enforcement proceedings on four basis:

1. The adjudicator's decision was obviously wrong on a simple and straightforward reading of the Payment Notice and Pay Less Notice taken in their proper context and SSL's Part 8 arguments were so strong that it would be unconscionable for the Court to enforce the Decision without regard to them;

2. If the Court declared the Payment Notice invalid and the Pay Less Notice valid, then the net notified sum payable to LOR would reduce from circa £5.6m to circa £2.4m.

3. There had already been five separate and further adjudications which determined the true value of LOR's underlying claims, substantially undermining LOR's entitlement. Those five interim binding decisions meant that LOR must accept the notified sum was not in fact due, and at best, LOR would have to repay circa 90% of the notified sum. The court should give SSL permission to defend the value of those further decisions so as to give effect to all of the interim binding decisions in place between the parties, which would reduce any summary judgment in LOR's favour to a small fraction of the sum claimed.

4. There should be a stay on any sums payable as LOR was insolvent and only continued to trade due to support from its parent company.

At enforcement, ordinarily the court ought not to entertain consideration of the correctness or otherwise of the adjudicator's decision in line with the 'pay now, argue later' approach. In this case, it was necessary to proceed some way on the issue of construction in order to be satisfied that the exceptional circumstances in paragraph 9.4.5 of the TCC Guide did not apply. That required the Court to have regard to whether the adjudicator made a clear error (but acted within his jurisdiction), and the issue was one which, on summary judgment application, it would be unconscionable for the court to ignore.

To determine whether exceptional circumstances applied to depart from the usual 'pay now, argue later' approach, the Court stated that it needed to consider the issue of whether the adjudicator made a clear error.

At the conclusion of argument, it was submitted by LOR that as the Court had been addressed on the issue of construction at the enforcement proceedings hearing, then it would be sensible in the interest of saving time and costs for the court to decide the same. The Court agreed - seemingly allowing some element of appeal or reconsideration of the adjudicated issues before payment.

The reasoning of the decision does however make clear that upon having been addressed on the issue of the adjudicator's construction of the payment notice, the criteria of paragraph 9.4.5(c) of the TCC Guide for departing from the usual 'pay now, argue later' approach (on the basis that it would be unconscionable for the court to ignore at enforcement) were not met. Similarly, (albeit the question did not arise) on the issue of the Pay Less Notice the criteria of paragraph 9.4.5(c) were not met.

Had the court not had the benefit of a full argument and been invited to determine the same, then it is likely that the court would have enforced the adjudicator's decision, pending the Part 8 proceedings.

The Enforcement Decision

The court held that:

• The Payment Notice was invalid (agreed with adjudicator).

• The Pay Less Notice was valid (disagreed with adjudicator). The court found the Pay Less Notice was sufficiently detailed to be valid, rejecting LOR's argument that because the Pay Less Notice starts with the wrong figure, it ends with the wrong balance, meaning that the ability to make deductions is lost.

Conclusion

This decision confirms a crucial point: a defective payment notice does not automatically taint or invalidate a Pay Less Notice.

For employers, this offers reassurance - if the pay less notice is valid in substance and timing, it may still be effective even where the payment notice is not.

However, the judgment should not be seen as a safety net. A pay less notice cannot rescue a payer if it is defective or served late. The consequences of a failed notice remain severe and expensive.

The safest course remains:

• ensure both notices are accurate;

• explain the basis of calculation; and

• serve them within the strict statutory and contractual deadlines.

Practical implications

• Timing is critical – late notices still fail.

• Precision matters – clearly state the sum due and the basis of calculation.

• Substance over labels – a notice need not use specific terminology, but ambiguity can be fatal.

Need advice?

Our specialist construction disputes and dispute avoidance team can assist with Payment Notices, Pay Less Notices, and related disputes. For more information, please contact Dickon Court, Lee Ward, Jessica Jackson, or Chloe Wood.