However, and despite this, for about the first three years after the LDEDCA came into force, the consensus of opinion was that if a Payee commenced an Adjudication on the basis that a ‘notified sum’ was due arising from a Default Payment Notice, then the Payer would simply commence its own Adjudication to obtain a Decision as to the ‘true value’ of the account at or about the time of the Default Payment Notice which (if appropriate) the Payer would present at any enforcement proceedings that became necessary to, in effect, counteract the Adjudicator’s Decision in respect of the ‘notified sum’. Therefore, because it was considered that two sets of proceedings would normally be at a disproportionate cost, by and large, Default Payment Notice Adjudications were not generally pursued.
However, this ‘laissez-faire’ approach was completely shattered by way of the judgment in the ISG Construction Ltd v Seevic College  EWHC 4007 (TCC) case. In that case, Mr Justice Edwards-Stuart decided that the ‘notified sum’ on an Interim Default Payment Notice was the ‘amount due’ in the period in question, and therefore another (or the same) Adjudicator could not Decide upon the ‘true value’, at or about the same time as being the ‘amount due’, as a Decision would already have been reached on the ‘amount due’ as being the ‘notified sum’.
The basic principles of the ISG v Seevic case was that the ‘pay now – argue later’ ethos of the LDEDCA would be undermined if a counter-Adjudication could be commenced thereby completely diminishing the strength of a Default Payment Notice. Without such a fall-back position being available to a Payer a Default Payment Notice would have real ‘teeth’, and this is what the Construction Industry had been calling out for in the consultation leading up to the LDEDCA.
The ISG v Seevic judgment hit the Construction Industry like a bombshell, and spawned a deluge of what became known as ‘Smash and Grab’ Adjudications, being an Adjudication where a Payee claimed the sum due in its Default Payment Notice on the basis that the Payer did not submit a valid and timeous Payment Notice or Pay Less Notice. In such an Adjudication, the ‘true value’ of the works was not relevant, the only thing of interest was the ‘notified sum’ as stated on the Payee’s Default Payment Notice. A 'Smash and Grab' Adjudication could, in certain circumstances, result in the Payer having to pay a substantial sum to the Payee that did not reflect the sum that the Payee would have been entitled to under the contract, i.e. the 'true value', at the time of the assessment. This could obviously put the Payee firmly on the front foot when it comes to final account negotiations particularly if the 'Smash and Grab' Adjudication was launched towards the end of a project (as was often the case) at a time when the Payer could not recover any (or any substantial part) of the ‘overpayment’ through subsequent interim valuations / assessments.
In my 2015 Construction Law Review Article entitled ‘Be Careful What You Wish For– Lest it Becomes True’, which focused on the ISG v Seevic case, I commented that that judgment had opened the floodgates for Default Payment Notice claims (which was all well and good when the party was the Payee but was less welcomed when that same party may subsequently be the Payer – hence the title of my article). Further, my feeling at that time was that when the Courts realised just how wide the floodgates had been opened for what subsequently became known as ‘Smash and Grab’ Adjudications, they may try to close the floodgates, even though the Construction Industry had clearly been calling for Payee Default Payment Notices to have more ‘teeth’.
In my 2016 Construction Law Review article entitled ‘Closing the Floodgates’, I noted, as I had anticipated, that, despite the Construction Industry wanting to have Default Payment Notices with ‘teeth’, the Courts had spent the year following the ISG v Seevic case, through various other Court cases, in tightening up the procedural notice requirements and thereby trying to close the floodgates for ‘Smash and Grab’ Adjudications that had been flung wide open by the ISG v Seevic case.
Now things have moved on again, and in 2018, there has been a court case which is widely reported to have brought to an end ‘Smash and Grab’ Adjudications.
The case in question being Grove Developments Limited v S&T (UK) Limited  EWHC 123 (TCC).
In the Grove v S&T case, Mr Justice Coulson decided that a second Adjudication after a Default Payment Notice Adjudication on the ‘true value’ was permissible as it was a different dispute to the one decided in the ‘Smash and Grab’ Adjudication. This finding was completely contrary to the judgment in the ISG v Seevic case, and under Paragraph 144 of the judgment of the Grove v S&T case, Mr Justice Coulson said:
"Finally, though, I should say this. In all my time in the TCC, I am not conscious that I have ever concluded that one of my colleagues, past or present, was wrong in deciding an issue in a certain way. I am not entirely comfortable about doing it now, particularly given the distinguished nature of Edwards-Stuart J’s service to this court. But the conflict in the cases is all too apparent and, for the reasons which I have given, I find myself unable to follow the "different line" that he took in ISG v Seevic and Galliford Try v Estura. It follows that I consider that my departure falls squarely within paragraph 9 of the judgment in Willers v Joyce, in that there is a powerful reason for not following those two cases (and any decisions which in turn have followed them)."
Under Paragraph 145 of his judgment, Mr Justice Coulson said;
"...I consider that, on first principles, Grove are entitled to raise the dispute as to the ‘true’ valuation of interim application 22 in a subsequent adjudication. ... I consider that that conclusion is confirmed by a consideration of the relevant Court of Appeal authorities, which are binding on me. ... I consider that the analysis in ISG v Seevic and Galliford Try v Estura is erroneous and/or incomplete. ..."
In considering the position following the Grove v S&T case, the first point to make is that both the ISG v Seevic case and the Grove v S&T case are judgments of first instance and therefore, in terms of direct precedence, Mr Justice Coulson’s apparently obiter comments as set out above, have no direct effect upon the binding nature of the judgment in the ISG v Seevic case; although it must be accepted that those said comments will be highly influential in future proceedings. Another important point to note is that it is widely considered to be the case that the Grove v S&T case may be subject to appeal, and, if that is the case, the Court of Appeal may support or reject the decision reached by Mr Justice Coulson in the Grove v S&T case.
However, putting to one side the above points about apparently obiter comments, precedence, and possible appeals, the question is, does the Grove v S&T case bring ‘Smash and Grab’ Adjudications to an end in any event?
Mr Justice Coulson addresses this particular matter at paragraphs 136 to 138 of his judgment in the Grove v S&T case, where he says:
"136. ... ..The suggestion, which Mr Speaight argued fully before me, was to the effect that, if an employer could start a second adjudication as to the 'true' value, it would destroy the policy underlying the 1996 Act.
137 I do not fully understand that submission: I certainly do not accept it. One of the purposes of the 1996 Act was to ensure that the contractor was entitled to maintain proper cash-flow. On my analysis, the contractor would not be prejudiced in respect of cash-flow at all, because he would be recovering the full amount for which he had claimed in his interim application. That amount would have to be paid by the employer. So there is no threat to cash-flow.
138 If a second adjudication took place thereafter, which concluded that the contractor had over-claimed and therefore been overpaid, the contractor would have to repay the amount of the overpayment. What could possibly be wrong with that?......"
It is therefore clear from the Grove v S&T judgment, particularly from Mr Justice Coulson’s insistence that the amount Decided in a ‘Smash and Grab’ Adjudication "would have to be paid", that 'Smash and Grab' Adjudications are still permissible and the Payer will still be obliged to pay any sum awarded to the Payee in accordance with the Adjudicator's Decision. Also, based upon these comments, it would appear to be the case that the courts will not stay enforcement of any sum awarded in a 'Smash and Grab' Adjudication pending the outcome of a Decision in a second ‘true value’ Adjudication.
Although diminished somewhat in effect, 'Smash and Grab' Adjudications are therefore still alive and well and are a potentially potent strategic option for a Payee, particularly as a second Adjudication on 'true value' could be very complex and may take some time and may cause the Payer significant cost to prepare for and to commence.
Despite the above point, and whilst it is clear that the Grove v S&T case has not closed the door on ‘Smash and Grab’ Adjudications entirely, because the opportunity now exists to commence an Adjudication on the ‘true value’ at or about the same time, the extremely draconian effects of a ‘Smash and Grab’ Adjudication has clearly been considerably reduced.
However, finally, a word of caution, in my previous Construction Law Review articles, I referred to the floodgates being first opened and then being closed following a flood of ‘Smash and Grab’ Adjudications, and as this matter still appears to be in a state of flux, we should perhaps remember the possibly prophetic song lyrics of Bob Dylan lyrics which referred to flood waters having grown, and which said; "... don’t speak too soon, for the wheel is still in spin, ... for the loser now will be later to win, for the times they are a changin’". Therefore, watch this space.
Peter Barnes Blue Sky ADR Ltd