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Grove v S&T - the end of the ‘smash and grab’ adjudication?

The end of smash and grab adjudications?

Update on Grove v S&T 

Kirsteen Cacchioli - Technical Director, Driver Trett UK revisits the guidance surrounding ‘smash and grab’ adjudications and the precedent that could lead to their demise.

I recently wrote about the demise of the so-called “smash and grab” adjudication (read it here), particularly in light of the TCC decision in Grove Developments Ltd v S&T (UK) Ltd [2018] EWHC 123 (TCC)

In that case, Mr Justice Coulson (as he then was) set out a clear judgement in favour of the paying party being entitled to adjudicate on the true value of an application, even in the absence of a valid payment notice or pay less notice.  What remained somewhat open for discussion however (despite Mr Justice Coulson’s decision), was the point at which the paying party was entitled to commence that adjudication.  Was it only after payment had been made, or might there be an opportunity for the paying party to commence an adjudication on the true value of an application before any payment was made¹?

Shortly after publication of my original article, the case of Grove v S&T came before the Court of Appeal², in which this particular matter was dealt with in some detail by Lord Justice Jackson, who had been persuaded to return to the bench for this landmark ruling. 

His judgement was decisive;  the entitlement of a paying party to commence adjudication proceedings arises only after payment of the original notified sum:

“Both the HGCRA and the Amended Act create a hierarchy of obligations…  The immediate statutory obligation is to pay the notified sum as set out in section 111….  As a matter of statutory construction and under the terms of this contract, the adjudication provisions are subordinate to the payment provisions in section 111.  Section 111 (unlike the adjudication provisions of the Act) is of direct effect.  It requires payment of a specific sum within a short period of time.  The act cannot sensibly be construed as permitting the adjudication regime to trump the prompt payment regime.  Therefore, both the Act and the contract must be construed as prohibiting the employer from embarking upon an adjudication to obtain a re-valuation of the work before he has complied with his immediate payment obligation.” ³

This all seemed clear.  However, the recent case of M Davenport Builders Ltd v Greer & Anor4  potentially casts some doubt over the practical interpretation of the Grove v S&T decision, particularly in terms of the jurisdiction of the adjudicator in the second, “true value” adjudication.

In Davenport v Greer, Davenport carried out some building work for the Greers under a contract which had no provision for adjudication or payment.  As such, the relevant terms of the Construction Act were implied into the contract.  Davenport issued its final account in the sum of £106,160.84), but the Greers failed to pay.  They also failed to issue a payment notice or a pay less notice.  Davenport commenced adjudication proceedings for the payment of its final account sum.  In that first adjudication, the Adjudicator found that Davenport was entitled to payment of the full sum of £106,160.84 because of the Greers’ failure to issue a payment notice or a pay less notice which would entitle them not to make payment of that amount.

Subsequent to that decision, but before making payment of the sum determined in the first adjudication, the Greers commenced a second “true value” adjudication.  In this second adjudication, the Adjudicator (a different Adjudicator) found that no sums were due to Davenport. 

Davenport proceeded to bring enforcement proceedings against the Greers for non-payment of the award in the first adjudication.  The Greers contended that there was no requirement for them to make that payment, as the second adjudication had found that no sums were due.

The main decision before the court was whether there was an obligation on the Greers to make the payment awarded in the first adjudication, given the outcome of the second adjudication.  Mr Justice Stuart-Smith considered that there was, and held that the Greers had to make the payment resulting from the first adjudication before they could rely on the decision of the second adjudication.  As such, the element of Grove v S&T which obliged a party to comply with the decision in a first “smash and grab” adjudication before being able to reap the potential benefits of a second “true value” adjudication was followed.

However, the potential problem with the decision in Davenport v Greer is that the Greers had commenced the second adjudication before complying with the decision in the first adjudication. This would seem to go against the judgement of Lord Justice Jackson in Grove v S&T, in which it was made clear that the right to commence the second true value adjudication only arose once payment of the first adjudication had been fulfilled.  To do otherwise would, it might seem, render the decision of the second adjudicator invalid for want of jurisdiction.  However, this matter was not addressed by Mr Justice Stuart-Smith, who did not question the jurisdiction of the second Adjudicator.  He simply said that the Greers could not rely on the decision in the second adjudication to avoid paying the decision of the first adjudication.

This approach potentially leaves more “grey areas” in the field of smash and grab adjudications.  It does not state that a second, true value, adjudication would be invalid for want of jurisdiction if it is commenced before payment of the first “smash and grab” adjudication decision is made, yet it prevents the “winner” of the second adjudication from relying on that second decision to offset any payment which is due as a result of the first adjudication.  This seems to be an unhappy middle ground, and is one which is likely to cause further consternation in the world of the smash and grab adjudication.

¹ The question being whether the cause of action arises on the overvaluation of the work or the overpayment for work done.

² S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA 2448

³ S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA 2448 (paragraphs 107 to 110)

4 [2019] EWHC 318 (TCC)

Articles  /  Europe  /  Global

Articles  /  Europe  /  Global

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