The opportunity to refer a “smash and grab” adjudication presents itself when, the payee having issued its application for payment, the paying party neglects to issue either a timely payment or pay-less notice. The sum applied for then becomes the “notified” sum which must be paid by a stipulated date. The payee can then refer this narrow dispute to adjudication.
However, following a “smash and grab” decision, paying parties often wish to correct this procedural defect by starting a “true value” adjudication to determine the actual sum due.
In Grove Developments v S&T [2018] EWHC 123 (TCC), Coulson J (as he then was) stated that, once a paying party has paid the “smash and grab” decision, it is “then free to commence its own adjudication proceedings in which the dispute as to the 'true' value of the application can be determined.” This passage was expressly approved by Jackson LJ in the subsequent appeal (S&T v Grove [2018] EWCA Civ 2448).
However, despite the above statement, there has been recent case law concerning the timing of “true value” adjudication referrals.
Davenport v Greer [2019] EWHC 318 (TCC)
In Davenport v Greer, the claimants had obtained a “smash and grab” decision relating to its final account application. The defendants declined to pay the sum awarded, and commenced a “true value” adjudication six days after the first decision was issued.
Stuart-Smith J considered the Court of Appeal decision in S&T, and restated that the principles in that case were “clear and unequivocal in stating that the employer must make payment in accordance with the contract or in accordance with section 111 of the Amended Act before it can commence a ‘true value’ adjudication.”
However, the judge also discussed the decision in Harding v Paice [2015] EWCA Civ 1231. In that case, the defendant had referred a fourth adjudication before paying the sum awarded to the claimant in the third adjudication. Stuart-Smith J stated that there was nothing in Harding to suggest that payment of the “smash and grab” sum “is a prerequisite to…starting…a later true value adjudication” and that the principle in S&T does not mean that the court will always “restrain the commencement…of a true value adjudication commence before the employer has discharged his immediate [payment] obligation”.
This appears to allow the paying party to refer its “true value” dispute soon after receiving the “smash and grab” referral. This strategy would have the effect of narrowing the gap between payments and leaving the paying party exposed for less time.
However, S&T would seem the more persuasive authority based on Jackson LJ’s express approval of the principle versus Stuart-Smith J’s implied reading of Harding.
Broseley London v Prime Asset Management [2020] EWHC 944 (TCC)
In Broseley v Prime Asset Management, the claimant had obtained a “smash and grab” decision in respect of an interim valuation, following the defendant’s failure to issue valid notices. The defendant did not pay the sum due. The claimant subsequently applied for summary judgment, and the present case dealt with the defendant’s application for a stay of execution. They argued for a stay of two months, providing them sufficient time to obtain a “true value” adjudication decision.
Mr. Roger Ter Haar QC reiterated the principle in Grove that the defendant could not start a “true value” adjudication having not paid the initial sum awarded. The judge recognised that the facts in S&T were not reflective of those in the present case, but nonetheless stated that allowing the commencement of a “true value” adjudication before payment of the “smash and grab” sum would be a “remarkable intrusion” into the principles established in Grove.
It is notable that the judge did not consider – or was perhaps not referred to – Stuart-Smith J’s suggestion in Davenport that a “true value” adjudication could commence before payment of the first decision. The decision in Broseley appears to revert to the strict principle laid down in S&T.
However, Mr. Ter Haar QC did note the defendant’s “lack of enthusiasm” in resolving the final account to date; around seven months had elapsed between the “smash and grab” decision and the present proceedings. The speed in which a paying party looks to bring a “true value” adjudication could be a factor in the courts’ willingness to approve it.
Commentary
The principle stated by the Court of Appeal in S&T is sufficiently clear: pay the “smash and grab” decision before commencing the “true value” adjudication. This enforces the “pay now, argue later” policy which drove the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “Act”).
The cases which followed and are discussed above – both Davenport and Broseley – both reiterate that principle. However, Davenport also suggests that a “true value” adjudication might be commenced prior to payment of the “smash and grab” decision.
It is imperative that parties issue correct and timely notices under their contracts. This reinforces their respective rights under the Act. Contractors and sub-contractors who are not paid the “notified sum” should seek advice as to how best to recover it. Employers and contractors in receipt of a “smash and grab” referral should take advice on that adjudication and any next steps.
