In construction disputes, smash-and-grab adjudication is a powerful tactic used to secure payment when the paying party fails to issue a valid payment or pay less notice. If the correct notices aren’t served, the contractor can claim the full amount of their application – whether or not the valuation is accurate.
However, this approach is not without its complexities. Understanding what a smash-and-grab adjudication is, when to use it, and how to defend against it is essential for both paying and receiving parties in the construction industry.
Below, we’ll explore the meaning of smash-and-grab adjudication, the circumstances in which it can be used, key considerations when pursuing a claim, and how it differs from a true value adjudication. We’ll also examine recent case law and discuss the legal principles governing smash-and-grab adjudications. Whether you’re a contractor looking to enforce payment or an employer seeking to defend against an unfair claim, this guide will provide you with the essential knowledge you need.
What is Smash and Grab in Adjudication?
Smash-and-grab adjudication is a payment dispute mechanism in construction contracts that arises when a contractor or subcontractor submits a valid payment application, but the paying party fails to issue a payment notice or pay less notice within the required timeframe. When this happens, the contractor is entitled to the full amount claimed – without the need to prove the actual value of the work done.
This approach leverages procedural rules rather than valuation disputes, making it an effective way for contractors to enforce payment quickly. It is based on the Housing Grants, Construction and Regeneration Act 1996 (as amended) – also known as the Construction Act – which mandates strict payment deadlines to ensure cash flow in the industry. Employers and main contractors who overlook these deadlines risk facing smash-and-grab adjudications in construction, where they are legally obliged to pay in full, even if they believe the claim is excessive.
While some view smash-and-grab adjudication as an unfair loophole, others see it as a necessary safeguard against late or withheld payments. In either case, understanding the meaning of smash-and-grab adjudication and the importance of issuing timely notices is critical for all parties involved in a construction contract.
When to Use Smash-and-Grab Adjudication
Smash-and-grab adjudication is particularly effective in the following situations:
- Non-Payment Due to Administrative Failures – If an employer or main contractor simply forgets or fails to issue the correct notice, a smash-and-grab adjudication allows the contractor to enforce payment.
- Cash Flow Pressure – Many contractors rely on regular payments to maintain financial stability. A smash-and-grab claim ensures that funds are received promptly, without waiting for a lengthy valuation dispute.
- Avoiding Delays in Disputed Valuations – Even if the paying party disputes the claimed amount, they must pay it in full before challenging it through a true value adjudication. This shifts the burden onto the employer to prove the correct valuation after making the payment.
- Ensuring Compliance with Payment Provisions – By pursuing smash-and-grab adjudication in construction, contractors reinforce the importance of strict adherence to contractual and statutory payment rules, discouraging late or withheld payments.
However, smash-and-grab adjudication is not always the best approach. If there is any doubt over the validity of the payment application, or if the employer can prove that the payment process has been altered by prior conduct, the claim may fail. Contractors should carefully assess the strength of their payment application before proceeding with adjudication.
Key Considerations on Smash-and-Grab Adjudication
Before pursuing a smash-and-grab adjudication, contractors must ensure that their payment application is valid and meets all procedural requirements. Failure to do so can lead to a weak claim or an unsuccessful adjudication. Here are the key factors to consider:
1. Is It Clear That It Is a Payment Application?
A payment application must be unambiguous. It should clearly state that it is a request for payment under the contract and specify the sum claimed. If the document is vague or could be mistaken for something else, such as a progress update or an invoice, the adjudicator may reject the claim.
2. Has the Application Been Calculated for the Correct Valuation Period?
The payment application must relate to the correct valuation period as set out in the contract. If the contractor submits an application for a different period or duplicates a previous claim, the employer may argue that it is invalid.
3. Has the Payment Application Been Served in Time and the Correct Manner?
Most construction contracts specify deadlines and methods for submitting payment applications. If an application is late or sent via the wrong communication channel, such as email instead of a project portal, it may not be enforceable. Contractors should review their contracts carefully to ensure compliance.
4. Is the Sum Due Clearly Stated?
A valid payment application must include a clear and specific amount due. If the figure is inconsistent or lacks supporting details, the employer may challenge its validity. A well-prepared application should itemise the claim and align with the valuation of works carried out.
5. Have the Payment Provisions Been Varied by the Parties’ Conduct?
Even if a contract includes strict payment provisions, parties’ conduct can sometimes alter how payments are handled in practice. If both parties have consistently followed a different payment procedure over time, an employer may argue that this overrides the contract’s formal payment provisions.
6. Are All Supporting Documents Included?
Supporting evidence, such as site progress reports, invoices, and breakdowns of the work completed, can strengthen a smash-and-grab claim. A well-documented application leaves little room for the paying party to dispute its validity.
Ensuring that all these factors are addressed before proceeding with a smash-and-grab adjudication increases the chances of success. Even if a claim is procedurally sound, the paying party may still seek to challenge it through a true value adjudication, making it crucial to be prepared for potential counterclaims.
What’s the Difference Between Smash-and-Grab and True Value in Adjudication?
While smash-and-grab adjudication is based on procedural failures, true value adjudication focuses on assessing the actual value of the work completed. Understanding the distinction between these two adjudication types is crucial for both contractors and employers in managing payment disputes effectively.
Smash-and-Grab Adjudication
A smash-and-grab adjudication arises when a contractor submits a valid payment application, but the paying party fails to serve a payment notice or pay less notice within the required timeframe. As a result, the contractor is entitled to the full amount claimed, regardless of whether it accurately reflects the value of work completed. This process is driven by strict adherence to payment procedures rather than an assessment of the actual work done.
- Key characteristic: The claim is won based on a procedural failure, not on valuation.
- Outcome: The paying party must settle the full amount of the application.
- Employer’s response: The only way to challenge the sum claimed is to initiate a true value adjudication later.
True Value Adjudication
A true value adjudication, on the other hand, determines the actual sum due for the work completed. In this type of dispute, the adjudicator assesses the work performed, materials supplied, and any deductions applicable under the contract to establish a fair valuation of the payment due.
- Key characteristic: The focus is on assessing the true value of the work rather than procedural compliance.
- Outcome: The adjudicator determines the correct amount due, which may be higher or lower than the original payment application.
- Employer’s response: A true value adjudication cannot be used to withhold payment due under a smash-and-grab claim unless payment has already been made.
What is The Grove Principle?
The Grove principle, established in Grove Developments Ltd v S&T (UK) Ltd (2018), is one of the most significant rulings in smash-and-grab adjudication case law. It clarified that while a contractor can enforce payment through a smash-and-grab claim, the paying party still has the right to dispute the true value of the payment – but only after making payment.
Before Grove, there was uncertainty about whether an employer could challenge a smash-and-grab claim by immediately launching a true value adjudication. The court in Grove firmly rejected this approach, ruling that:
- If an employer fails to issue a valid payment notice or pay less notice, they must pay the full amount of the contractor’s payment application.
- The employer cannot avoid or delay payment by immediately disputing the valuation of work.
- Once the smash-and-grab adjudication sum has been paid, the employer can commence a true value adjudication to assess whether they have overpaid.
This decision provided much-needed clarity and has since been upheld in several key cases. It ensures that procedural compliance is strictly enforced while allowing employers to correct any overpayment through later adjudication.
Court Decisions on Recent Smash-and-Grab Cases
Since Grove, courts have continued to refine the law on smash-and-grab adjudications and their interaction with true value claims. Some key cases that have reinforced and developed the Grove principle are discussed below.
M Davenport Builders Ltd v Greer (2019)
This case was one of the first major applications of the Grove principle. Davenport Builders sought payment through a smash-and-grab adjudication, which was successful because the employer, Greer, had failed to issue a valid pay less notice. Greer attempted to challenge the amount through a true value adjudication before making payment, but the court ruled that they had to pay first, challenge later, as established in Grove.
This case confirmed that:
- The employer cannot withhold payment by immediately launching a true value adjudication.
- The contractor must be paid in full if the correct notices have not been issued.
- The employer may still dispute the actual valuation – but only after settling the amount claimed.
Henry Construction Projects Ltd v Alu-Fix (UK) Ltd (2023)
This case provided further clarity on the timing of a true value adjudication when a contractor has made a notified sum claim through a smash-and-grab adjudication.
Henry Construction sought to challenge a payment obligation by launching a true value adjudication at the same time as a smash-and-grab adjudication. The court ruled that:
- A true value adjudication cannot be used to disrupt or delay a contractor’s entitlement to the notified sum under the Construction Act.
- The paying party must first comply with its immediate payment obligation before raising a true value challenge.
- Smash-and-grab adjudications remain an effective tool for contractors to enforce payment when notices are not issued correctly.
This case reinforces the Grove principle and demonstrates that courts continue to uphold strict procedural compliance in construction adjudications.
Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd (2020)
This case addressed whether a company in liquidation could still pursue a smash-and-grab adjudication for unpaid sums under the Construction Act.
The Supreme Court ruled that:
- Liquidation does not prevent a company from adjudicating on unpaid payment claims.
- However, any disputed cross-claims must be resolved through the insolvency process rather than through adjudication.
- The decision confirmed that insolvent companies retain the statutory right to adjudicate, although enforcement may be more complex.
This ruling is significant because it clarifies that insolvency does not automatically bar smash-and-grab adjudications, ensuring that contractors in financial distress can still seek to recover payments owed to them.
Lidl Great Britain Ltd v Closed Circuit Cooling Ltd (2023)
This more recent case not only reaffirmed the Grove principle but also clarified its broader application.
The dispute arose when Lidl failed to issue a payment notice or pay less notice in response to Closed Circuit Cooling Ltd’s payment application. Lidl sought to challenge the payment obligation by raising a true value adjudication, but the court ruled in favour of Closed Circuit Cooling Ltd. This maintained that if an employer does not issue the correct payment notice, they are bound by the sum in the payment application, and that a true value adjudication cannot be used as a defence to avoid payment.
However, this case went further than previous rulings by clarifying an important unresolved question – whether the restriction on true value adjudications applies solely to valuation disputes or has a broader reach. The court indicated that the Grove principle may extend to other claims, such as damages or set-offs brought by the employer.
This means that:
- The principles of Grove may apply beyond valuation disputes, potentially preventing an employer from using adjudication to offset payments with damages claims before making payment.
- If an adjudicator were to hear a true value adjudication before payment, they may lack jurisdiction, rendering the adjudication unenforceable.
This ruling strengthens the smash-and-grab adjudication process by ensuring that paying parties comply with their immediate obligations before raising counterclaims or valuation disputes. It also provides important guidance on adjudicator jurisdiction, reinforcing that adjudications must follow the correct procedural sequence.
When Can the Paying Party Commence a True Value Adjudication?
For employers facing a smash-and-grab adjudication, one of the biggest challenges is the timing of a true value adjudication. While they can dispute the actual value of the work, they cannot use a true value claim to withhold payment once they have failed to issue a valid payment notice or pay less notice. Instead, payment must be made first, and only then can they initiate a true value adjudication to reassess the amount owed.
This means that even if an employer believes the contractor’s payment application is excessive, they must still pay it in full before seeking an adjustment through adjudication. If they attempt to initiate one beforehand, the adjudicator may lack jurisdiction, as seen in Lidl.
Once the sum from the smash-and-grab adjudication has been settled, the employer can bring a true value adjudication to assess whether they have overpaid and, if so, claim a refund or adjust future payments accordingly. For both contractors and employers, these rules highlight the importance of getting payment processes right.
Final Thoughts
Smash-and-grab adjudications remain a powerful tool for contractors to secure payment when employers fail to issue the correct notices on time. The courts have consistently upheld the principle that procedural compliance under the Construction Act takes precedence over valuation disputes, ensuring that contractors can enforce their entitlement to payment without unnecessary delays.
However, this does not mean that the notified sum is the final word. As confirmed in Grove and subsequent cases, employers retain the right to challenge the true value of the works – but only after settling their immediate payment obligation. The timing of a true value adjudication is crucial, and any attempt to bypass the requirement to pay first may result in an adjudicator lacking jurisdiction to decide the dispute.
For contractors, understanding when and how to use smash-and-grab adjudication can help maintain cash flow and enforce contractual rights. For employers, issuing timely and valid payment notices is the best way to avoid exposure to smash-and-grab claims and retain control over valuations.
At Witan Solicitors, we provide expert legal guidance on construction adjudications, helping businesses navigate payment disputes and protect their contractual rights. Whether you’re a contractor seeking to enforce payment or an employer looking to defend against an unfair claim, our team is here to assist. Get in touch with us today to discuss your case.
