Q: I am the main contractor on a large infrastructure project, and we subcontracted the work to a small firm. Towards the end of the project, this subcontractor issued an interim payment application that suddenly included an extra £3m, vastly overvaluing its works. I didnt send any payment notice or pay-less notice, but simply paid a fair amount at the end of the month omitting the £3m.
The subcontractor is threatening to adjudicate for the full sum it sought. If we have to pay its inflated figure, there wont be sufficient time left on the project to recover the £3m by deducting it from subsequent interim payments. Can I start an adjudication for a decision on the true value of the subcontractor's works and simply pay that sum?
A: This is a useful reminder that the paying party should always adhere to contractual notice requirements. The action threatened by the subcontractor is colloquially known as a smash-and-grab adjudication.
Until recently, the courts had been ruling that the sum applied for would be payable in these circumstances, and that the paying party could not then bring an adjudication for the true value of those works. Last November, the Court of Appeal confirmed in S&T (UK) Ltd v Grove Developments Ltd  EWCA Civ 2448 that a paying party that has failed to serve both a payment notice and a pay-less notice is still entitled to commence an adjudication to have the true value of the application assessed and to reclaim any overpaid sum.
The judge gave six reasons for this decision as follows.
In Grove, the Court of Appeal also considered the question of timing. The judge found a true-value adjudication could not start until after payment had been made, and that the mandatory payment provisions in the Housing Grants Construction and Regeneration Act 1996 (as amended) must take priority over the statutory right to adjudicate: thus the paying party must pay first and adjudicate later. This position was followed in February 2019 in M Davenport Builders Ltd v Greer and another  EWHC 318 (TCC).
It remains unclear whether a party can adjudicate for the true value if it commences this process either before the smash-and-grab adjudication, or after but before a decision on the notified sum. How a party seeking to run a smash-and-grab adjudication would stop the true-value adjudication if the paying party started one also needs clarifying – would it have to challenge the adjudicator's jurisdiction or seek a court injunction?
Applying the judgments in Grove and Davenport, the main contractor may be best served by:
Charles Blamire-Brown is partner and David Greenwood senior associate at Pinsent Masons firstname.lastname@example.org email@example.com
Related competencies include: Contract practice