The latest in adjudication law is all about timing…
Last week the court of appeal – one of the highest courts in the land – confirmed the recent decision of the Technology and Construction Court. In the case of a successful ‘smash and grab’ adjudication, the employer is able to submit a further adjudication for ‘true valuation’. This changes the position previously thought to be correct following the dispute in ISG Construction v Seevic College in 2014.
A smash and what?
A ‘smash and grab’ adjudication. We’re not quite sure where the name came from, it’s a bit of a misnomer. The term was coined after the last round of changes to the Construction Act. Essentially, where the Employer hadn’t responded in time to an application for payment, the amount could be claimed in adjudication by default. It was thought the employer couldn’t then claim a corrected valuation until after the project completed. Known as the ‘single dispute’ rule in adjudication.
The process for payment (as you probably know) is quite procedural. Briefly, the Contractor submits a payment application and the Employer submits a payment certificate (the ‘notified sum’). Sounds simple enough, but as is usually the way with law, if you get the procedure wrong, you risk losing out. If the Employer doesn’t submit a payment certificate then the Contractor’s application becomes the notified sum by default.
So it’s not so much ‘smash and grab adjudication’ as ‘get what you are due after the Employer had a chance to object but didn’t bother adjudication’. The terminology conjures up terms of robberies and men in striped shirts. But the payer has had plenty of time to respond to an application for payment, so it shouldn’t be a surprise that the amount applied for becomes due, even if wrong.
So what’s changed?
In the latest case, the courts ruled that rather than the £14m claimed, a more appropriate calculation should be made and a ‘true valuation’ adjudication should be allowed. The Employer assessed the amount to be closer to £1.4m – quite different from the Contractor’s payment application.
What’s changed is that the court has now confirmed that in law, the Employer should be entitled to make an adjudication for a ‘true valuation’. The courts have been quite explicit about the timings throughout the whole process, which is where some disagreements still lie. Timing of claim submissions and timings of adjudications are all critical to the process.
Could ‘smash and grab’ survive?
The court has noted that ‘each case will turn on its own facts’. Future cases may not be decided in the same way, depending on the various factors involved. Timing, it seems, is everything. There are many different factors affecting an outcome. A different case in different circumstances might have a different result.
The main difference now is that the likelihood of success in such cases is now less certain. Previously if the Employer had failed to keep up with the process it was almost taken as read that a ‘smash and grab’ adjudication would be a success. Now, that’s less clear.
Employers (as well as Contractors) need to be mindful of the timescales for notices and payments. And Contractors may need to be aware that their payment claims might not succeed, even if they’ve met the correct times and dates and the Employer hasn’t.
The key here might well be the contract. Careful amendment of the contract might help avoid such disputes. However, as we’ve said before, the real key is to read and understand the contract. Take careful note of the timings for notices and payments, then stick to them. And if you need help, you know where to find us.