Raising an unpaid notified sum in defence of a true value adjudication

In VMA Services Limited v Project One London Limited [2025] EWHC 1815 (TCC) the Court confirmed that a party can raise a “Smash and Grab” defence to a True Value Adjudication and that, if successful, this will (1) prevent the claiming party continuing with their True Value Adjudication and (2) the Adjudicator also has the power to order payment of the notified sum to the defending party.

The Facts:

In October 2023, VMA Services Limited ("VMA") and Project One London Limited ("POL") entered into a JCT Design and Build Sub-Contract (2016 Edition) for design and installation of mechanical works (the “Contract”). The Contract included the usual provisions for interim payments and was a “construction contract” under the Housing Grants and Construction Regeneration Act 1996 (the “Act”).

On 21 June 2024, VMA submitted Application for Payment No 8 (the “Application”) to POL, seeking payment of £106,434.88. POL failed to issue a valid Payment Notice or Pay Less Notice in response to the Application and so under the Act, the sum sought in the Application became the “Notified Sum”.

The Adjudication

On 16 December 2024, POL commenced a True Value Adjudication (“TVA”) seeking payment from VMA. As a defence, VMA argued that the TVA could not continue because POL had yet to pay the Notified Sum for the Application.

In its decision of 10 February 2025 (the "Decision"), the adjudicator determined that the Notified Sum was due to be paid, and that this was a successful (and complete) defence to the adjudication. The adjudicator found he was “not required to embark on the true value of the Works as the immediate payment obligation is required to be made by POL to VMA". POL was then ordered to pay the Notified Sum plus interest to VMA immediately.

Following the Decision, POL failed to make payment of the Notified Sum and VMA raised proceedings in the Court to enforce the Decision. The judge found in VMA's favour, upholding the decision of the adjudicator.

Reasoning

The judge's reasoning was::

• When a party fails to issue a valid Payment Notice or Pay Less Notice in response to a valid application for payment, the sum in the application becomes the "notified sum" and is immediately payable.
• Any entitlement to commence a TVA is subject to first making payment of the Notified Sum. This requirement applies regardless of whether a contractor has first raised or obtained an adjudication decision in their favour.
• The Notified Sum was payable as a matter of law and a separate adjudication insisting on payment wasn’t needed – the adjudicator in POL’s adjudication could order payment to VMA.

The Implications

This case confirms the Court’s strict approach to payment and serves as a warning to any party considering raising a True Value Adjudication. If that party hasn’t paid the notified sum for the application in question, there is not only a risk their adjudication will fail, but that they will be ordered to pay the other side the outstanding Notified Sum value (likely along with the Adjudicator’s fees and interest).

For more information, contact our construction and engineering team, or your usual Brodies contact.