Blog 039 - Common Sense Payment Applications

As a specialist contractor, you know that getting paid is everything. Securing timely and fair payments is crucial to pay your staff, suppliers and, hopefully, yourself! That’s why the recent decision in 1st Formations Ltd v LAPP Industries Ltd is particularly good news for our sector.

This case saw LAPP Industries Ltd successfully enforce an interim payment application that Formations argued was unclear and invalid. The dispute arose after LAPP submitted an interim payment application for £100,000 plus VAT “on account” of a larger sum. Formations failed to serve a payment or pay less notice and lost a “smash and grab”. They then challenged the validity of the application itself. The Technology and Construction Court (TCC) sided with LAPP, reinforcing a common sense, commercial approach to payment applications. This isn't just another legal skirmish; it's a vital confirmation for every specialist contractor.

So, what exactly does this mean for your business and your payment applications?

5 Bullet Point Takeaways for Specialist Contractors:

1. Clarity over Perfection: Your payment applications do not require absolute precision. So long as a reasonable recipient can understand what is being claimed and why. Focus on making your intent obvious.

2. Provisional is Permitted: The Court confirmed that the fact LAPP sought less than the full amount stated as due, or that the sum was said to be based on a provisional valuation and might be subject to any agreed adjustment, did not undermine the validity of the payment application. This offers flexibility for being paid for potentially unagreed values.

3. QS Commando: So many specialists don’t have a QS (hit me up?) and may therefore be nervous about the quality o your payment applications, this case helps us realise that we can afford to be a bit rough around the edges provided we are clear and genuine. That should give some confidence to specialists operating with out a QS.

4. No Room for Nitpicking: The Judge in this case dismissed Formations’ arguments, showing that courts will not condemn payment applications on artificial or contrived grounds. This should give you more confidence that minor technical flaws won't derail your rightful payment.

5. Be Clear and Unambiguous: While absolute precision isn't required, your payment application still needs to be sufficiently clear and unambiguous. To a reasonable recipient, it must be obvious that you are requesting a specific payment.

This decision confirms that our industry's statutory payment regime prioritises getting cash flowing fairly. It's a reminder to continue submitting clear payment applications, knowing that the courts support a practical, commercial view.

Need help producing a payment application or getting paid? Drop me an email, and we can discuss further.