Employers must still pay up on “smash and grab” adjudication decisions

In the recent case of M Davenport Builders Ltd v Greer & another [2019] EWHC 318 (TCC), the Technology & Construction Court (TCC) ruled that an employer may not use the sum due following a decision on a ‘true value’ adjudication to counter or set-off an earlier ‘smash and grab’ adjudication decision, which required the employer to pay monies to the contractor.

Background

M Davenport Builders Ltd (Davenport) were engaged by the Greers to carry out construction work under a contract. Following completion of the works, Davenport sought final payment from the Greers totalling £106,160.84.  The Greers failed to pay the monies, serve a payment notice or serve a ‘pay less’ notice before the relevant deadline as required under the provisions of the Scheme for Construction Contracts implied within the contract.  In response, Davenport commenced a so-called ‘smash and grab’ adjudication against the Greers in mid-2018.  Davenport was successful and awarded the full amount demanded in respect of its final account.

The Greers did not pay any monies to Davenport following this decision.  Instead, the Greers swiftly commenced a so-called ‘true value’ adjudication in order to ascertain the proper value of the final account.  The adjudicator, despite seeming unsure of his own jurisdiction, found that no monies were owed to Davenport by the Greers.

TCC Proceedings

Despite the outcome of the ‘true value’ adjudication, Davenport applied to the TCC for enforcement of the original ‘smash and grab’ adjudication decision.  Davenport argued that the Greers should not be able to rely on the ‘true value’ adjudication decision as they had not paid the amount awarded in the original ‘smash and grab’ adjudication before commencing the ‘true value’ adjudication.  The Greers, on the other hand, contended that there was no need to pay the sum awarded in the original adjudication before the second adjudication was decided.

Both parties agreed that, generally, the unsuccessful party to a ‘smash and grab’ adjudication can commence a ‘true value’ adjudication after making payment of the awarded sum.  Instead, the argument for the TCC to decide was whether payment could occur before the unsuccessful party makes payment of the awarded sum.

TCC Decision

Mr. Justice Stuart-Smith in the TCC applying for the first time the 2018 case of S&T (UK) Limited v Grove Developments Limited [2018] EWCA Civ 2448,  found that an employer (the Greers, in this case) could not use a ‘true value’ adjudication decision to defend, counter or set-off the payment of a prior ‘smash and grab’ adjudication.

On this basis, an unsuccessful party will be required to pay sums awarded following a ‘smash and grab’ adjudication before it will be able to rely on the decision of a subsequent ‘true value’ adjudication.  However, Mr. Justice Stuart-Smith refused to  decide on, “whether or in what circumstances the Court may restrain the subsequent true value adjudication“.

It is therefore not clear whether the Court will act to prevent a party from commencing a ‘true value’ adjudication (i.e. by way of an injunction) where that party has not yet paid sums awarded following a prior ‘smash and grab’ adjudication.  This is an issue which will require further clarification from the Court.

For any construction related query please contact Chris Hoar.