Smash And Grab Adjudications – Redressing The Balance

A review of Coulson J's final TCC decision in Grove, another instalment in the 'smash and grab' adjudications saga.

This article was first published in Construction Law on 1 June 2018 (reference (2018) 29 5 Cons.Law 27).

Key Points

When drafting a pay less notice, an employer can refer to and rely on calculations set out in other documents. The wording of that reference, and the content referred to, must be crystal clear In the absence of a pay less notice, the contractor is entitled to be paid the sum stated as due in its payment application An employer who disagrees with the contractor's valuation but fails to serve the pay less notice can start a fresh adjudication to determine the true value payable but must first pay the sum stated as due Ideally, employers will want to issue 'true value' adjudications at the same time as contractor smash and grab adjudications so that they can, potentially, set off any 'overvalue' in the contractor's application found by the second adjudicator against the sum found by the first adjudicator to be payable due to the lack of a pay less notice. Coulson J's insistence on the employer paying up before starting a 'true value' adjudication may scupper this approach Contractors may now think twice before starting smash and grab adjudications − especially where the employer has already disputed the figures and a second, expensive, 'true value' adjudication is likely Construction adjudication was established under the Housing Grants, Construction and Regeneration Act 1996 as amended (the HGCRA 1996) to improve cash flow for those working on projects under construction contracts. The 'pay now, argue later' approach has become the backbone of the adjudication procedure and is rigorously supported by the Technology and Construction Court (TCC).

In recent years, contractors have used a 'smash and grab' adjudication to take advantage of the draconian 2011 changes to the payment terms under the HGCRA 1996. Contractors can start such adjudications when an employer fails to respond in time to a payment application often made at the end of the works but before the final account. Tactically speaking, success in such an adjudication transfers the whole pot of disputed valuation money into the contractor's pocket ahead of the final account process without going through the contractual valuation process. The employer must still pay up even if it has disputed those valuations throughout the project.

In Grove Developments Ltd v S&T (UK) Ltd [2018] EWHC 123 (TCC), Coulson J has redressed the balance between contractors and employers and made such adjudications less attractive.

The background

The claimant (Grove) engaged the defendant (S&T) to design and build a hotel at Heathrow Terminal 4 using the JCT Design and Build Contract 2011. The key facts are as follows:

S&T's interim application no 22 (IA22) was approximately £40 million, £14,009,906.58 higher than Grove's previous valuation. In response, Grove served a payment notice, detailed assessment of S&T's valuation and...