In the much discussed judgment of Grove Developments Limited v S&T (UK) Limited  EWHC 123 (TCC), Coulson J held that an employer is free to commence a second adjudication to dispute the true valuation of an interim payment application, provided it has paid the sum stated as due in the interim application.
Coulson J considered that the decisions in ISG v Seevic and Galliford Try v Estura, which paved the way for 'smash & grab' adjudications, were in fact wrongly decided.
By way of reminder, 'smash & grab' adjudications arise where a contractor makes a payment application for a specific sum and the employer fails to issue a valid payment and pay less notice. The amount specified by the contractor becomes the 'notified sum' and the employer is obliged to pay without the true value of the claim being assessed.
Much to the relief of many employers, in his reasoning Coulson J confirmed that the dispute decided in a first adjudication (as to the validity of a payment or pay less notice) is a different dispute to the true value of the interim application in issue. Coulson J decided that there is "radically different treatment" of employers and contractors - where an employer serves a payment or pay less notice that is lower than the sum in a contractor's payment application, the contractor is afforded the right to dispute the true value of an application through adjudication. His decision in Grove sought to rectify that imbalance.
Unsurprisingly, S&T appealed to the Court of Appeal and its judgment was handed down on 7 November 2018. Sir Rupert Jackson found that all three limbs of Coulson J's first instance decision were correct and therefore clarified the correct interpretation of the payment provisions in the amended Construction Act.
The Court of Appeal also confirmed that an employer who misses the deadline for both a payment and a pay less notice can subsequently adjudicate to have the true value of an interim application assessed, and agreed with the six reasons given by Coulson J:
- Adjudicators can open up, review and revise interim applications;
- Section 108 of the Act and paragraph 20 of the Scheme do not limit that power;
- The issue of the notified sum and the true value of an application constitute different disputes for adjudication;
- Contracts allow for a distinction between the "sum due" when work is valued and the "sum stated as due" being the amount to be paid;
- An employer should have the same right as a contractor to adjudicate where there is a disagreement over the value of the notified sum; and
- The position at the final account stage (where a dispute concerning the true value of the account can still be brought) should not be different from the position in relation to an interim application.
The Court of Appeal then confirmed that the adjudication provisions in the Act are subordinate to the payment provisions and therefore payment must be made in accordance with the notified sum dispute before a true value dispute can be adjudicated.
This decision has confirmed that the practice of seeking payments due to invalid or absent payment or pay less notices has become more open to challenge, with that challenge expressly being permitted through adjudication and not requiring the investment of time and costs which Court proceedings demand.
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