The recent case of M Davenport Builders v Mr & Mrs Greer brings some welcome clarity to the position set out in the Grove decision regarding "smash and grab" adjudications by contractors and subsequent "true value" adjudications by employers.
The facts
Mr & Mrs Greer engaged M Davenport Builders to carry out works at a building in Stockport. An interim application for payment of £106,000 was made by Davenport in June 2018. Mr & Mrs Greer did not submit a payment notice and did not issue a pay less notice. Accordingly Davenport issued a default payment notice which altered the final date for payment, the Greers again missed the opportunity to issue a pay less notice. They did not pay the sum demanded and Davenport raised, and won, an adjudication for payment in terms of its interim application. The Greers did not pay the sum awarded or any part of it.
Instead Mr and Mrs Greer commenced an adjudication of their own to determine the true value of the works, the adjudicator determined that no further sums were due to Davenport and directed each party to pay 50% of the fee.
The court was asked to determine whether the second adjudicator's decision was enforceable by way of defence, set-off or counterclaim. The court considered the judgment of Coulson in the Grove case and found that the obligation to make payment of an adjudicator's decision on the basis of what is often termed a "smash and grab" adjudication is immediate. The court stated "it should now be taken as established that an employer who is subject to an immediate obligation to discharge the order of an adjudicator based on the failure of the Employer to serve either a Payment Notice or a Pay Less Notice must discharge that immediate obligation before he will be entitled to rely upon a subsequent decision in a true value adjudication". In this case, Mr & Mrs Greer had not discharged that obligation and therefore could not rely on the second decision and were obliged to make payment to Davenport of the sum awarded in the first adjudication.
The court also determined that the clear policy reason behind the Housing Grants Construction and Regeneration Act and the Scheme was to encourage cash flow through not only the project but the industry, the court drew no distinction between an interim or final application and stated that "deprivation of cash flow may have a serious adverse influence on a contractor whether it occurs during or at the end of the works."
Conclusion
This case is welcome clarity that an employer must pay the sums found to be due to a contractor by an adjudicator where the Employer has failed to serve either a Payment Notice or a Pay Less Notice. An Employer is entitled to thereafter raise a "true value" adjudication and the adjudicator in that true value adjudication has the power to award repayment of any overpayment.
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