In recent years, whenever someone discusses Adjudication, the term "Smash and Grab" can normally be found close by.
As the courts have given the issue of Smash and Grab Adjudications ("Smash and Grab") close attention over the last few months we often get asked whether Smash and Grab still has a role to play in the area of Adjudication.
1 What is a Smash and Grab Adjudication?
Adjudication is the bespoke statutory dispute resolution forum for the construction industry. It was introduced to speed up payment however it is commonly used for more complex disputes. Adjudication is supposed to be a fast-track process which is determined by an independent Adjudicator who is either appointed following agreement between the parties or via the nominating body stated in the contract.
Smash and Grab arises in respect of a payment dispute where the paying party has failed to issue the correct notices. Where a payment application is submitted it can be used to create a due sum if either a payment notice or payless notice has not been served timeously or does not contain the required details (namely, the sum stated as being due and the basis of calculation of that sum). In these circumstances there is a technical failure and this can be relied upon by the party seeking payment to claim payment of the full sum included in their payment application. Hence the name Smash and Grab.
Unsurprisingly a common complaint regarding Smash and Grab from the paying party is that the payment application is overstated and does not represent the "true valuation" of the work carried out to date. This frequently leads to a second Adjudication to determine what the true sum actually is. The courts have confirmed that subsequent Adjudications which are used to determine the true value of a dispute are allowed (whether that be at interim or final valuation stage). This leaves the party seeking payment questioning whether it is worthwhile to commence a Smash and Grab if ultimately they are going to have to adjudicate twice.
2 Is it still worthwhile commencing a Smash and Grab Adjudication?
The recent English court decisions of S&T (UK) Ltd v Grove Developments Ltd [2018] and M Davenport Builders Ltd v Greer & Anor [2019] confirm the principle that a party’s immediate obligation to pay a notified sum “trumps” a party’s right to adjudicate upon a ‘true valuation’ dispute. This means that if a party is successful in a Smash and Grab, the paying party must make payment of the sum awarded in the Smash and Grab before adjudicating on the true valuation of the account.
There are no recent Scottish court decisions on the issue of Smash and Grab, however should the issue arise, the Scottish courts would find these English case authorities persuasive.
These court decisions allow Smash and Grab to live another day. Parties to a construction contract now know that they cannot immediately commence a second true valuation adjudication without first making payment. If they seek to do so they can expect to be met with a jurisdictional challenge and an argument that the adjudicator cannot continue to determine the dispute.
Smash and Grab is not always the correct option. For example, if a party knows that there are elements of their application that cannot be properly substantiated, they may wish to simply commence a true valuation adjudication for payment instead of having a series of adjudications to get to the same result. However if a party knows that their payment application stands up to scrutiny, a Smash and Grab may be the preferable route. What is clear however, is that even if the paying party make payment in accordance with the Smash and Grab decision, this does not necessarily mean that it is the end of the matter. Payment could simply be made to allow a true valuation Adjudication to be commenced.
Whilst Smash and Grab is not a magic wand and will not always be the end of the story when it comes to a payment dispute, there does remain some merit in Smash and Grab and we will continue to see them used going forward.
We act in all forms of dispute resolution in the construction and engineering industry. If you wish to discuss how we can assist with any issue you may have from contract formation to dispute resolution feel free to get in touch.
