Liquidated damages – notice requirements under JCT

One of the points that arose in the case of Grove Developments Limited v S& T (UK) Limited which has been rather overshadowed, is a consideration of the notice requirements under JCT before Liquidated Damages can be levied.

Under the standard JCT wording the employer must issue a non-completion notice stating that the works did not complete on time.

JCT then requires two further notices, firstly one setting out that the employer "may require payment of, or may withhold or deduct, liquidated damages” (“the First Notice”) and then, before sums are deducted, the employer must issue a second notice under which the employer "requires" the contractor to pay liquidated damages and/or that the employer "will" withhold or deduct liquidated damages (“the Second Notice”).

Then if the liquidated damages are to be deducted from sums otherwise due, a pay less notice has to be served.

In total there are potentially four notices.

In the Grove v S& T case it was decided, at first instance, that the First and Second Notice could be served just seconds apart provided they were served in the correct order (see Alexandra Pike’s blog

This has now been confirmed by the Court of Appeal. However the judgment acknowledges that the procedure provides no obvious benefit to anyone, if the employer warns the contractor of what he may do just seven or eight seconds before he actually does it.
This shines a spotlight on this JCT clause, which can be difficult to follow. Why have two notices? Why not amend to just have the one?

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