The question of whether a single adjudication notice could refer both a claim for payment on a 'smash and grab' and 'true value' basis was undecided by the courts until the decision in Bellway Homes Ltd v Surgo Construction Ltd [2024] EWHC 10 (TCC).
The Technology and Construction Court observed that this case had "novel points which have not previously been decided and will be of significance to the construction industry". This article summarises the judgment and considers its key implications for the construction industry.
Background
Roundel Manufacturing ("R") and Surgo Construction Limited ("SCL") entered into a sub-contract ("the Contract") on 2 October 2019, for the supply and installation of kitchens in a building development project.
R made an application for payment on 22 December 2022 ("the Application") for the sum of £152,225.23 inclusive of VAT. SCL did not submit any notice, failing to make payment in accordance with the Contract. Consequently, R referred the matter to adjudication in March 2023.
The Adjudication
In the Notice of Adjudication dated 28 March 2023 the primary redress sought was a decision that a payment in terms of the Application was due (relying on a failure by SCL to comply with the payment mechanism under the Contract, otherwise called a 'smash and grab' adjudication). An alternative redress sought was a decision as to a valuation of the Application (a true value basis).
Therefore, there were two 'claims' submitted to the Adjudicator, namely:
- Smash and grab – based on the Application and correspondence between the parties, and the lack of a payment notice or a pay less notice from SCL; and
- True value – determined by the Adjudicator, based on the work that has been carried out.
The Adjudicator's Decision was that the Application was invalid, therefore the smash and grab claim was rejected. Instead, an award was made on a true value basis. The Adjudicator relied on the Application and valued the works that were carried out at that point in time.
The Adjudicator awarded £148,431.70 plus interest and VAT in favour of R. This sum was less than sought within the Application.
Thereafter, R assigned its rights to the sums awarded by the Adjudicator to Bellway Homes Limited ("BHL"). BHL raised an action for enforcement of the Adjudicator's Decision.
SCL (as the defendant) raised the following defences:
Court Enforcement Action Challenge 1: More than One Dispute
Firstly, SCL argued that there was more than one dispute referred to the Adjudicator. SCL submitted that due to there not being a clear link between the 'smash and grab' and 'true value' claims, they were independent and stand-alone "in analysis, procedure and purpose". BHL (as the claimant) maintained that there was only one dispute referred to the Adjudicator and that in any event, there was a close connection between the issues which came down to what sums (either under the route of 'smash and grab' or 'true value') were payable by SCL. Both parties relied on the leading case of Witney Town Council v Beam Construction (Cheltenham) Ltd [2011] EWHC 2332 (TCC) in relation to this. The court favoured BHL's submissions on this point and SCL's challenge was rejected. The court preferred the use of a 'common-sense approach' which considered the facts of the case. Overall, the court decided that the dispute could "fairly and much more straightforwardly be described as a single, disputed claim for the sum due".
Court Enforcement Action Challenge 2: Excess of Jurisdiction
Secondly, SCL highlighted that the Adjudicator's jurisdiction derived from terms of the Notice of Adjudication. SCL submitted that the Adjudicator was confined to deciding on the issues which were referred therein, and that as "as night follows day" the Adjudicator found that the Application was invalid, meaning that he lost jurisdiction to determine any amount of money due on a 'true value' basis. The court again disagreed with SCL, stating that there was not a "random unliquidated element" in the Adjudicator's decision. Instead, the court was of the view that the Adjudicator decided "the alternative route to his decision, namely request for the true value adjudication itself". Consequently, the second jurisdictional challenge was also rejected.
The outcome was such that the court granted a summary judgment in favour of BHL for enforcement of the Adjudicator's Decision.
Implications for the Construction Industry
This case serves as a reminder for parties that a failure to comply with the payment provisions can result in 'smash and grab' claims being made.
Importantly, for the first time the court has clarified that an adjudication can be advanced on both 'smash and grab' and a 'true value' basis. For a referring party, whilst it is now open to it to advance both claims in a single adjudication, consideration should be given to the cost and time savings which a 'smash and grab' adjudication can offer when compared against a 'true value' claim. For a responding party, jurisdictional challenges to defend these types of dual focus claims are unlikely to succeed and it may now find itself under increased pressure where it is required to deal with both types of claims in the one set of adjudication proceedings.
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