TCC Judgment to bring an end to ‘Smash and Grab’ Adjudications?

What is a ‘Smash and Grab’ Adjudication?

A ‘Smash and ‘Grab’ Adjudication is a term commonly used in the construction industry. What this refers to is a situation where a contractor has issued an Application for payment for example, no payment has been received nor has a payment notice or pay less notice been served. The contractor then successfully refers the matter to Adjudication for the full sum stated in the Application whether this represents a ‘true value’ for the works completed or not.

‘Smash and Grab’ Adjudications became more popular as a result of a case called ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC) (“ISG”), where the employer did not serve a valid pay less notice or payment notice. As such, it was deemed that by failing to serve the requisite documents, they had in fact agreed the value of the Application for payment. They could not then proceed to refer a further Adjudication disputing the true value of the works completed within that Application.

What is the recent TCC Judgment?

Mr Justice Coulson’s Judgment in Grove Developments Limited v S&T (UK) Limited [2018] EWHC 123 (TCC) (“Grove”) does not follow this same principle.

In fact, he departs from the ISG case. Mr Justice Coulson decided that Grove was entitled to commence a separate Adjudication for the ‘true value’ of the works, but only after payment of the Interim Application had been made.

If his decision is followed, it is widely believed that this may result in ‘the end of an era’ in terms of ‘Smash and Grab’ Adjudications moving forwards.

Does it matter if a Payless Notice is not issued?

Although a subsequent Adjudication may be issued to determine the ‘true value’ of an Application, it is very much on the basis that you have to pay the amount of the Interim Application first and then argue about the true value later. Therefore, it is always good practice to follow the procedure set out in the contract to avoid getting into disputes about the value of Applications.

If you do not agree to the value of an interim Application:-

  1. Ensure that a valid payment notice/pay less notice is served as soon as possible;
  2. Check your contract regarding the time frame in which to serve your pay less notice – if it is out of time, it won’t be valid;
  3. Include sufficient detail within your payment notice/pay less notice as to how you have calculated the sums you wish to deduct and why – include as much detail and substantiation as possible;
  4. Make sure the document is clearly marked as a ‘pay less’ notice to avoid any ambiguity;
  5. Check your contract as to how the pay less notice is to be ‘served’ – does it need to be sent by recorded delivery or is email delivery sufficient?

In my opinion, I am not sure we have seen the end of the so call “Smash and Grab” adjudications. This is simply on the basis that where the subcontractor is successful then they MUST be paid irrespective of whether they bring a separate adjudication for the true value.

If you would like more information in respect of the above or want to discuss specific facts relating to your dispute, please do not hesitate to contact us on (+44) 01133021330 (Leeds) or (+44) 02078732279 (London) and speak to Rashmi Dubé. Alternatively, you can send us an email on hello@legatuslaw.com.