Smash & Grab Adjudications
It seems that 'smash and grab' adjudications can still affect a paying party if payment procedures are not adhered to, despite the recent decision in Grove Developments Limited V S&T (UK) Limited ('Grove'), which some in the construction industry may have taken comfort from.
'Smash and grab' adjudications is the term given to the scenario when no valid payment notice or pay less notice has been issued by the paying party after an interim application is submitted, which in turn allows the payee to claim the sum set out in their interim application by way of adjudication. The 'true value' of the works is irrelevant in a ‘smash and grab’ adjudication and if the paying party refuses to pay, the payee can enforce an adjudicator's decision by way of court proceedings.
The case law prior to the Grove decision suggested that if no valid payment notice or pay less notice was submitted, then the paying party was regarded as having accepted the valuation as set out in the interim application. This left the paying party having to clawback any overpayment through subsequent interim applications or the final account process, or attempting to recover any overpayment by initiating adjudication proceedings if the final account was disputed.
The court in the Grove decision developed the above approach and decided that the paying party could also begin a second adjudication on the ‘true value’ of the works before a decision is reached in the 'smash and grab adjudication', as it is a different dispute.
Although on the face of it, this is a positive development in favour of the paying party, a second adjudication on the ‘true value' of the works could be complex as, if the disputed sum is large enough, it will likely require programming and quantum experts, which will incur high costs for the paying party.
In addition, it seems clear that the courts will not stay enforcement of any sum awarded in the ‘smash and grab’ adjudication pending the decision in the second adjudication.
Overall, although the decision in the Grove case has provided paying parties with some comfort, they should still ensure that the payment procedures in the contracts are strictly adhered to, to avoid the need to defend a ‘smash and grab’ adjudication, and initiate a second adjudication on the ‘true value’ of the works.
For more information on this article, please contact Nikitta Strongman, or you can give us a call on 0345 070 6000.