Grove Developments v S&T – the Court of Appeal weighs in on ‘smash and grab’ adjudications
07 November 2018
One of the final acts of Coulson J before his elevation to the Court of Appeal was to sound the death knell for smash and grab adjudications. We report here on his first instance decision in Grove v S&T.
In the pre-Grove era, if an employer failed to serve a valid payment or payless notice a contractor could claim payment under an interim valuation, safe in the knowledge that the employer could not rescue the position by bringing a competing ‘true value’ adjudication. Grove v S&T represented a marked departure from the previous law and significantly reduced the consequences of a deficient payment or payless notice.
The Court of Appeal has now had its say on the issue and dismissed S&T’s appeal. The key elements of its judgment are:
- It did not matter that Grove’s payless notice failed to set out the basis of its calculation but instead cross referred to Grove’s earlier invalid payment notice. However, the court did note that each case would turn on its own facts - it would be wrong to say either that a reference to another document would never be allowed or that it would always be allowed. Accordingly, employers would be well advised to avoid uncertainty by following as closely as possible the formal requirements for notices.
- The failure to serve a valid payment or payless notice did not prevent Grove from commencing a subsequent adjudication to determine the true value of the interim account. This was the most contentious part of the first instance decision – the effective removal of the ‘smash and grab’ adjudication. However, before being allowed to make a ‘true value’ referral to adjudication, Grove would first have to pay the sum stated in the interim application. This avoids the outcome that the failure to serve a valid notice would have no consequence.
- The Court of Appeal also considered the deduction of liquidated damages by Grove. Grove first delivered a warning notice and then notice of deductions, as required by the relevant JCT contract, but did so in such close succession that that S&T hadn’t received the warning notice before the deduction notice was sent. The Court held that the close proximity of the notices did not invalidate the deduction notice, even though this rendered the warning notice meaningless. The JCT did not prescribe a minimum period between the service of the two notices and it was not appropriate to imply such a period. Accordingly, and in the absence of a bespoke amendment, whilst a warning notice must still be sent it can be followed seconds later by a deduction notice.
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