UK Construction and Law

Employer cannot dispute a builder's invoices on a winding up petition when it served no pay less notice

By Staff Writer  |  16 August 2026

The employer said the price was fixed, the invoices unauthorised and the workmanship defective. The court held that none of that was open to it because no pay less notice had ever been served, and refused to stop the petition being advertised. The contract had never been put in writing.

A property company that tried to stop a winding up petition being advertised against it has lost, in a decision that carries the notified sum provisions into the insolvency arena. The judgment in Developstate Limited v Alexander Luxury (Yorkshire) Limited was handed down on 14 August 2026 in the Insolvency and Companies List of the Business and Property Courts in Leeds.

The two companies had contracted for the redevelopment of a property at Hessle in East Yorkshire. The contractor carried out the works and managed the development. No written contract was ever entered into. What the parties did agree was an elemental breakdown of the works in the sum of £367,246 plus VAT, which the contractor said was a working estimate rather than a fixed price, with additional works to be agreed and invoiced as they arose.

No payment terms were agreed either. Thirty invoices were raised and thirty were paid. On 16 December 2025 the contractor raised invoices 31 to 34, totalling £27,341.80, and those were not settled. A statutory demand followed on 24 December 2025, in the wrong company name, and was reissued correctly on 8 February 2026. The employer's solicitors terminated the contract by letter on 18 February 2026.

What the employer said, and why the court did not reach it

The employer's answer ran on four fronts. The disputed invoices had not been submitted in accordance with an agreed term requiring inspection before payment fell due. Works had been paid for that were never completed. Works had been charged for that were never agreed. And the workmanship was negligent. It also advanced set off claims totalling £83,361, and pointed to a consent order in which the parties had recorded a genuine dispute.

The judge dealt with the consent order first, finding it was not a binding agreement to compromise the application or the petition. Then he reached the point that decided the case.

The provisions of the Construction Act apply to this contract (it was not realistically suggested that it did not) and therefore where an invoice is presented the paying party must serve a Pay Less notice if it wishes to dispute the payments due.

His Honour Judge Richard Carter

Absent a pay less notice it is not open to a paying party to argue that the invoices are disputed on substantial grounds. The judge did not need to examine a single one of the challenges the employer had raised.

The cross claim, and why scepticism was warranted

A cross claim can still be run outside the limits of the Act, and the contractor's counsel accepted as much. The employer therefore had one route left: a genuine and serious cross claim exceeding the petition debt. It failed on the evidence.

The surveying report relied on was dated 16 March 2025 and identified £25,936 of corrective works, some of them drainage works outside the contracted scope. Despite the alleged defects being known, no complaint, demand for remedial works or pay less notice followed until the disputed invoices arrived. Further reports were served formally only days before the hearing, were not compliant with Part 35, and permission to rely on them was refused. One complaint, defective flooring, had been recorded as satisfactorily completed in a building inspector's report dated 19 July 2025, after the report that criticised it.

The judge also recorded that an unexpected steelwork problem had required substantial changes on a structural engineer's instructions, and that the building inspector approved both the changes and the works, which made it hard to see how the employer could assert this was unapproved or within the original price.

I therefore approach the Company's assertion that it has a valuable claim for defective work against the PC particularly with considerable scepticism.

His Honour Judge Richard Carter

He dismissed the application. He also rejected an argument that the contractor might be unable to meet a damages award because it was said to be a special purpose vehicle with no other assets, holding that the petitioner's financial position is not a relevant factor here.

What it means on site

The employer here paid thirty invoices without complaint and then tried to litigate the thirty first through the insolvency jurisdiction. The absence of a written contract did not save it, and neither did the absence of agreed payment terms. Where the Act applies, the notice is the mechanism, and a developer that treats an invoice as an opening position rather than a notified sum is not merely at risk of an adjudication. It is at risk of a petition it cannot answer.