CONSTRUCTION NEWS - NOVEMBER (1) 2018
SMASH & GRAB ADJUDICATIONS
The Court of Appeal last week in S&T (UK) Ltd v. Grove Developments Ltd [2018] EWCA Civ 2448 (“Grove”) upheld a previous TCC judgment which, following a successful “smash & grab” adjudication against it, allowed the employer to commence a new adjudication in order to determine the true value of the previous adjudication decision.

Background

The term “smash & grab” has come to denote adjudications in which payment is claimed under a construction contract in the absence of any payment or pay-less notice. It means that the amount claimed in any application for payment will have become the “notified sum” in accordance with section 111 of the Housing Grants Construction and Regeneration Act 1996 (“Act”). The paying party has to pay that sum even if it disputes the valuation of the application.

In Harding v. Paice [2015] EWCA Civ 1231 the Court of Appeal upheld a TCC decision whereby the employer was allowed to challenge the valuation of the payment application in a subsequent adjudication, despite the absence of notices which led to the smash & grab adjudication by the contractor.

Contrast the above with ISG Construction v. Seevic College [2014] EWHC 4007 (TCC), and Galliford Try Building Ltd v Estura [2015] EWHC 412 (TCC) which had come to the opposite conclusion, albeit the TCC held that employers could try and counter any valuation issues through subsequent interim applications.

When Grove was heard in the TCC, Coulson J (as he then was) said that the ISG and Galliford decisions had been wrongly decided. Harding v. Paice was the better approach therefore.

The Facts in Grove Developments

The case concerned the building of a new Premier Inn at Heathrow. Grove engaged S&T to construct the hotel under an amended JCT D&B 2011 contract.
Soon after practical completion S&T submitted an extra £14m interim payment application over and above what Grove believed to be the correct valuation. Grove therefore submitted a pay less notice and a dispute developed between them over the validity of Grove’s notices.

S&T then launched a “smash & grab” adjudication. The adjudicator held that Grove’s notices were invalid, with the result it was required to pay the full amount to S&T which became the notified sum under the Act.

Grove issued Part 8 proceedings in the TCC, in part seeking a declaration as to whether it could commence a new adjudication in order to determine the true value of S&T’s previous £14m interim application.

Importantly, as the parties had reached practical completion Grove was unable to recover the £14m via further interim payments - it would therefore need to wait until the final account procedure.

Coulson J confirmed that Grove could commence a new adjudication dealing with the correct valuation of the £14m.

The Court of Appeal

The Court basically endorsed the view taken by Coulson J in the TCC.

In addition, however, the Court clarified an important timing issue. Having had an adverse decision to pay S&T £14m, could Grove refuse to pay this sum pending the outcome of its own adjudication, or was it required to pay the £14m as a pre-condition of proceeding with its valuation adjudication?

The Court answered this question by saying that the adjudication had to run sequentially. So Grove would be required to pay first, and then seek recovery in its subsequent valuation adjudication.

Comment

This is an interesting development because under s.108 of the Act parties are free to commence adjudication at “any time” provided there is a dispute. This Court of Appeal decision appears to create an exception in circumstances where one party wants to commence a new adjudication in order to determine the correct valuation, i.e. it must pay first.

 
CONTACT: Christopher Filor
EMAIL: cfilor@filorsolicitors.co.uk   TELEPHONE: 01647 231475
MOBILE: 07891 055856   www.filorsolicitors.co.uk
This publication is not intended to provide legal or other professional advice and should not be relied upon as such. Readers should take legal advice before applying the information contained in this briefing.
You are receiving this email because you are subscribed to the Filor Solicitors mailing list.
If you have received this email in error, please accept our apologies.
If you do not wish to receive further emails from us, please click here to unsubscribe.
If you cannot see this email, please click here for the web version.