United Utilities Water Limited v Northstone (NI) Limited [2026] EWHC 1057 (TCC) considers a Part 8 application to determine the validity of a payment notice when the contract and CEMAR were following differing payment regimes due to a Deed of Variation mid project. The Court dismissed the challenge due to an absence of evidence – disputes over notice validity are often fact-sensitive and a Defendant cannot rely on Part 8 procedures if they fail to provide exhaustive evidence regarding the contextual scene.

For the senior construction professional, this case serves as a definitive warning: technical system errors or the inability to reprogram platforms like CEMAR might not provide a legal shield against the operation of the contractual provisions.

Background to Dispute

In 2017, United Utilities Water (‘UU’) engaged Northstone (t/a ‘Farrans’) as part of a joint venture with Roadbridge Limited for works to its water supply infrastructure in West Cumbria. The original contract was in the form of an NEC3 Option C with bespoke amendments and a Target Price of £85m which subsequently increased to £131.6m.

To mitigate further cost escalation, a 2021 Deed of Variation shifted the contract to an Option A. In exchange for moving to a fixed-price milestone model, the JV parties were also able to apply for payments as soon as each milestone was completed and an acceleration to the payment process from 35-days to 15-days. Importantly, amended payment schedule changes during the currency of the contract cannot be implemented on CEMAR due to system limitations.      

On 4 October 2024, the JV applied for payment and on 11 October 2024 the Project Manager issued its payment notice (‘PA-70’) with the amount due of -£3,269,328.05 where the Contract expressly allowed for repayment from the contractor to the employer. The due date under the Deed of Variation was a day later, however, CEMAR inserted a date of 8 November in line with the original contract.

There was also a payee’s payless notice, and this was 6 days late under the Deed of Variation schedule. Perhaps surprisingly, Farrons did not argue in the alternative that it had relied on the erroneous due date to its detriment and, as such, its payless notice was valid.

The dispute was referred to adjudication by UU and the adjudicator decided Farrans was to pay £3,269,328.05. The Part 8 claim concerned whether PA-70 was valid and, if so, was Farrans obliged to issue a payless notice. The Court only considered the payment notice validity.

The Payment Notice Validity

Farrans asserted that a payment notice must be absolutely explicit and free from ambiguity so that the parties know what to do about it and when. This was important in respect of the timing for any payless notice. Farrans argued that the incorrect date on CEMAR constituted a material failing that invalidated the payment notice.

Her Honour Judge Kelly’s analysis relied on the objective test for contractual notices and applied the nine principles from Advance JV v Enisca Limited [2022] EWHC 1152 (TCC). Dismissing the subjective confusion of the parties, the court emphasized that a reasonable recipient must be credited with full knowledge of the relevant contract.

She ruled that determining notice validity was inextricably linked to factual disputes regarding the parties’ knowledge of the CEMAR system’s limitations and that Farrans did not dispute the testimony of UU’s witness who asserted that Farrans was fully aware that CEMAR had not been reprogrammed to reflect the 2021 dates. Further the court found that Farrans provided no evidence regarding their own understanding of the CEMAR procedure after the 2021 amendments. It said: “…the evidence provided by Farrans is insufficient to enable the court to determine how the relevant notices were received against the background of the knowledge of the actual parties.”

The Court cited Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989:“No contracts are made in a vacuum; there is always a setting in which they have to be placed.” The Court found that applying the reasonable recipient test was “not possible on the evidence presently available before the court” and exercised its discretion to refuse the Part 8 declarations, finding the issues unsuitable for summary determination.

Further Consideration – Erroneous Due Date & Notice Validity

The question that remains unanswered: does the hypothetical ‘reasonable recipient’ think an incorrectly stated due date can invalidate a payment notice? With the intricacies of the statutory payment regime, this might be a situation where there is no hard and fast rule and, perhaps stating the obvious, the question for the reasonable recipient is one of ‘fact and degree’.

Henia Investments Inc v Beck Interiors Ltd [2015] EWHC 2433 (TCC) at paragraph 18(c) states: “It must also be clear that the Contractor must state what it considers due “at the relevant due date”. The relevant due dates are spelt out in the Contract… Whilst it is not absolutely necessary that the specific due date is expressed in the Interim Certificate, it must be clear and unambiguous that an application relating to a specific due date is being made.”

On the contrary, in 1^st Formations v LAPP [2025] EWHC 1526 (TCC) Mr Adrian Williamson KC stated the erroneous due date did not go to the validity of the payment application: “It may be that one or other of these dates was erroneous. But, in my judgment, that would not invalidate the Application. Rather, Formations might have been entitled to respond that the due date and/or the final date for payment had not yet arisen. That goes to points that might be raised in answer to the Application, rather than to the validity of the Application itself.”

In an attempt to apply these authorities to Farrans, the rule in LAPP might be distinguished as the judgment considered an erroneously early due date. However, applying Henia, if the payee issues a payless notice in accordance with the erroneously late due date in the payment notice, the reasonable recipient might need to consider whether the payment notice overcame the ‘clear and unambiguous’ threshold in Henia.

A potentially key fact in a case like Farrans is the stated due date in the payment application. As Coulson LJ stated in RBH Building Contractors Ltd v James & Anor [2026] EWCA Civ 511: “…the notice must be construed in context … In this way the reasonable recipient will, amongst other things, be credited with knowledge of the relevant contract … If the notice in question is a payless notice, the recipient will be taken to know the detail of its own payment notice, to which the payless notice is a response.”