So-called ‘smash and grab' adjudications have been the subject of much debate in the construction industry in recent years. Associate Director and Head of Construction, Sam Field MRICS, explains how to protect yourself from the ambiguity of ‘smash and grab’.
The recent significant case of Grove Developments Limited v S&T (UK) Limited, considered as one of the so-called ‘smash and grab’ adjudications, still leaves much uncertainty regarding an employer's right to adjudicate the true value of the sum due under a construction contract after failing to serve payment notices and without first paying the amount required by the contractor.
The general feeling is that ‘smash and grab’ only occurs on large contracts, and there is an element of truth in this, but it can happen on smaller contracts too.
Indeed, my colleague, Stuart Birrell, is advising on a domestic contract worth approximately £80,000. The job was finished with the usual pile of disputed instructions, so during the Defects Liability Period the contractor put in a draft final account, but it was worded it in such a way that it could be construed as a payment notice. The contract administrator did not respond. In fact, he let the time run until it was too late to issue a pay less notice. The contractor adjudicated, knowing the adjudicator had no choice but to award the contractor the considerably inflated amount of money.
Why do companies ‘smash and grab’?
Despite the obvious reason of achieving more money, making this type of claim from a contractors’ point of view is not a particularly good marketing ploy and therefore it will only be done when:
(a) there is a considerable amount of money at stake, or;
(b) the contractor is in financial trouble and likely to go bust, or;
(c) has absolutely no intention for working for the client again.
Navigating the pitfalls
There are a few things you can do to try to avoid being caught in this complex situation, such as:
- Make sure all due dates are flagged in good time to make sure you don’t miss them;
- Make sure that you are aware of the final dates to issue pay less notices;
- During the Defects Liability Period, make sure you comply with the terms of the contract regarding interim payments. (It may be prudent to amend the contract in this element);
- Make sure you know what constitutes a payment request.
‘Smash and grab’ adjudications have not been eradicated, therefore a paying party should try to avoid the need to defend a ‘smash and grab’ adjudication at all costs by adhering to the payment procedures in their contracts.
Read the contract thoroughly and do not put it away once it has been signed; you need to know exactly what it says.