In Laing O’Rourke Delivery Limited v Shepperton Studios Limited [2026] EWHC 612 (TCC), Shepperton (‘SSL’) resisted enforcement on four primary grounds including: (i) the suitability of Part 8 proceeding on enforcement; (ii) the permissibility to set off one adjudication decision against another (HS Works v Enterprise[2009]); and (iii) the stays of execution due to insolvency (Wimbledon v Vago [2005]). This article focusses on another well-trodden issue: the substance of Payment Notices (‘PN’) and Payless Notices (‘PLN’), the second of which raises a novel point.
The dispute arose from a building contract for works at Shepperton Studios, with Laing O’Rourke (‘LOR’) as the Contractor and SSL as the Employer. By way of an adjudication decision on 21 December 2025, SSL were ordered to pay LOR the sum of £5,627,275.11 plus VAT, representing the amount in payment application.
Contract Interpretation
Unlike the ordinary smash and grab adjudication enforcement proceedings where the defendant relies on the legal authorities to challenge the validity of notices, here SSL relied primarily on the contract terms and cited Arnold v Britton [2015] UKSC 36, where Lord Neuberger considered when the natural meaning of terms prevails over commercial common sense:
“…the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook,paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed”;
“…considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning”;
“…commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language”;
“…a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed”;
“When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties”; and
“[where] an event subsequently occurs which was plainly not intended or contemplated by the parties, judging from the language of their contract… if it is clear what the parties would have intended, the court will give effect to that intention”.
Payment Notice Invalidity
There are two facets to any type of payment notice: it must do more than merely state a ‘sum due’; it must provide sufficient detail so that a reasonable recipient can understand how that sum was derived – the ‘basis of calculation’.
The PN identified a gross valuation of £367,137,528.39 and the sum due was stated as £2,420,516.84. However, it failed to provide any breakdown of how this figure was calculated. SSL submitted that the requirement to identify the basis on which the sum in the PN has been calculated required no more than the identification of a gross valuation from which the sum paid is deducted, giving the balance due. It said to include a breakdown would be a “gloss” on the plain words used.
The court disagreed and said: “Importantly, the Gross Valuation was neither broken down nor was there reference to any other document in which it could be seen how that sum was calculated” and Clause 4.14 of the amended contract imposed the requirement to set out the calculation of the gross valuation. Failure to satisfy this specific contractual gateway rendered the notice a nullity.
SSL attempted to save the PN by arguing that LOR possessed the breakdown from previous payment cycles. The judge said that whilst the gross sum was the same as the previous 4 PNs, he found that this was insufficient and said: “there should generally be no need to look beyond the document itself or, in appropriate cases as in S&T v Grove Developments, documents incorporated by reference”. Although this might seem extremely Draconian, this supports the over-riding objective of ‘cash flow is king’ under the Act.
Payless Notice Validity
With full breakdown provided, SSL’s PLN stated that it was entitled to withhold: £1,791,983 in liquidated damages; £539,512.88 in respect of providing utilities to the LOR; and £97,018.59 for temporary catering arrangements. SOR maintained its successful argument in the adjudication that as the deductions were made from the sum of £2,420,516.84 (the figure in the PN), if that PN was invalid, the balance of £0 said to be due in the PLN must necessarily be wrong and as the adjudicator found, “the absence of a build-up of the gross valuation was fatal to the pay less notice”.
The court disagreed. Although the PLN originated from an “unsupportable gross valuation”, it was valid because the specific deductions SSL intended to make were detailed in clear appendices. The judge said: “Given SSL had detailed in the pay less notice itself the sums sought to be deducted, it is not an attractive argument to submit that SSL is nevertheless unable to make those deductions”.
The judge upheld the adjudicator’s decision but modified the sum to account for the valid PLN. The final order required SSL to pay £3,198,660.64 plus VAT, representing the difference between the sum applied for (£5,627,275.11) and the deductions detailed in the valid PLN (£2,428,614.47).
Discussion
Despite the substance of a PN and PLN being different in practice, particularly owing to contractual requirements, Placefirst v CAR [2024] EWHC 3280 defined the statutory requirements as follows: “It is a curious feature of the Act in its amended form that the substance of what is required to be contained in a payment notice and what is required to be contained in a payless notice is precisely the same…i.e. to state the sum that the payer or payee considers to be due and the basis on which that sum is calculated.”
It is trite that in respect of notices, the “calculation” part and the “sum due” part need not be correct in a notified sum dispute. However, this judgment provides a scenario where the sum due part is entirely irrelevant and the PLN need only provide a calculation part showing the “detail of the sums sought to be deducted” (and not detail the gross valuation) to be valid. Placefirst would suggest that the PN might also need only “detail of the sums sought to be deducted”.
Conclusion
Although this authority does not relate directly to the legislative framework under the Act, there would not appear to be any significant difference if the challenges were brought therein instead of under the contract, as they were. The logical conclusion appears to have been reached by the court but this judgment lessens the burden on a paying party in opposition to the legislative purpose of supporting cash flow in the industry.
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