‘Smash, Grab and Value’ – Confirmation from the Court of Appeal

The Court of Appeal (CA) has today handed down its decision in S&T (UK) Limited v Grove Developments Limited, and it is welcome relief to many in the industry that the CA has upheld Coulson J’s first instance decision.

Grove v S&T (UK) was the latest in a string of reported cases that followed ‘smash and grab’ adjudications. Smash and grab adjudications occur following a failure by a paying party to issue a valid Payment Notice and Payless Notice, enabling the payee to commence adjudication for payment of the amount specified in its Payment Application even if the payer disagreed with the amount due.

Much to the relief of paying parties, the CA affirmed that, notwithstanding that a paying party had failed to serve both a Payment Notice and a Payless Notice, the paying party is, in any event, entitled to commence an adjudication for assessment of the true value of the relevant application, reclaiming any amounts which may have been overpaid. However, in keeping with the ‘pay now, argue later’ spirit of adjudication, the CA asserted that a paying party must first pay any amount stipulated in an adjudicator’s decision and adjudicate the valuation thereafter.

The CA also provided helpful guidance in relation to Payless Notices. The CA confirmed the test to be applied to the proper construction of Payment Notices is how a reasonable recipient would have understood the Notice. Thus, if a Payless Notice expressly refers to documents previously given to the payee but does not attach such documents to the Notice, the Payless Notice would nevertheless be valid provided a reasonable recipient would understand the reference.

Finally, in relation to notices for liquidated damages under a JCT contract, the CA confirmed that both notices had to be received by a contractor in the given sequence. However, there was no particular time period which had to elapse between receipt of the two notices in order for the notices to be validly served.

Overall, the CA’s judgment is welcome news to the industry. Although it has not necessarily ended ‘smash and grab’ adjudication, the decision has added a third element to the rubric, ‘smash, grab, and value’.

For further information regarding this topic or any other construction matter, please contact Brenna Baye – Associate, Nik Haria – Head of Construction or any member of Edwin Coe Construction team.

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