Laura Tierney originally raised an action seeking repayment of money she claimed had been paid to the defender, GF Bisset (Inverbervie) Ltd, in error. The defender successfully counterclaimed for payment it contended was still due under their contract, which had not been constructed using a standard form of building contract.

The appeal was heard by Sheriffs Principal Derek Pyle and Craig Turnbull, along with Appeal Sheriff William Holligan. The appellant was represented by Cowan, advocate, and the respondent by R McDiarmid, solicitor.

Valid payment notice

An estimate prepared by the respondent in September 2015 provided for the carrying out of the work for the sum of £150,000, with payments due fourteen days from the date of monthly valuations carried out by the defender. The contract was considered a “construction contract” and was therefore regulated by the Housing Grants, Construction and Regeneration Act 1996.

After the first two valuations were paid by the appellant in full, a third valuation was issued by the respondent in November 2016. It was contended by the respondent that £40,572.34 was due by the appellant in terms of this valuation. The sheriff rejected an argument by the appellant that the third valuation was ineffective as a payment notice for the purpose of the 1996 Act, concluding that had she been dissatisfied with its terms she could have served an appropriate payment or pay less notice.

It was submitted for the appellant that the sheriff erred in holding that the third valuation was a valid payment notice. It did not specify the basis upon which the notified sum had been calculated, did not provide reasonable notice that the payment period had been triggered, and had not been issued in accordance with the parties’ contract.

It was a matter of admission that the respondent’s valuations had not been issued monthly as was stipulated under the contract. The appellant submitted as an esto position that, by failing to issue valuations in accordance with the contract, the respondent had waived the right to payment under section 109(1) of the 1996 Act.

Appellant’s failure

Sheriff Principal Turnbull, delivering the opinion of the court, said of the relevant parts of the contract: “The parties’ contract does not require the payer; any specified person; or the payee to give a notice in accordance with section 110A(2). In such circumstances, by virtue of regulation 4 of the Scheme for Construction Contracts (Scotland) Regulations 1998, the relevant provisions in Part II of the Schedule to the Regulations apply.”

He said of the effect of this: “Responsibility falls upon the [appellant], there being no specified person in this case. The implied terms of the parties’ contract, implied by virtue of section 114(4), required the appellant to give a notice in accordance with section 110A(2). The appellant failed to do so. The appellant’s failure cannot be overlooked in a consideration of certain of the issues raised in this appeal.”

Assessing whether the respondent’s valuation had been sufficiently specific, Sheriff Principal Turnbull noted: “The level of specification required will, to an extent, be dependent upon the requirements of the contract as to payment. The level of specification provided by the respondent in relation to three of the deductions is precisely that which is contained within the parties’ contract. Such an approach cannot be criticised, particularly when the deductions relate to provisional sums.”

On whether the valuation had the effect of a payment notice, he added: “There is no doubt as to the respondent’s intention. It was making application for payment. The reasonable recipient of the application would have been in no doubt that that was the case. The respondent’s third valuation is, in substance, form and intent, a payment notice in terms of section 110A(3).”

Sheriff Principal Turnbull concluded on the appellant’s esto argument: “On the respondent’s averments, the agreement would have seen the sum craved in the counterclaim paid in full by around the end of 2017. The sheriff considered the matter more than 3 years later. This issue may have a bearing on the question of interest which is still to be determined. We propose to say no more in relation to it, other than that the sheriff did not err in his treatment of it.”

The appeal was therefore refused.