What is a ‘Smash and Grab’?
The term ‘‘smash and grab’’ refers to a type of adjudication in construction contracts where payment is sought when a valid Payment Notice or Pay Less Notice is not issued. In such cases, the amount claimed in a payment application becomes the “notified sum” as defined under section 111 of the Housing Grants, Construction and Regeneration Act 1996 (as amended). Consequently, the paying party is required to pay this sum regardless of any disagreement over the accurate valuation of the claim. These adjudications often arise before the parties have fully evaluated the account.
Why is this important to Clients?
Understanding ‘‘smash and grab’’ adjudications is essential for clients, as it influences their ability to manage and safeguard payment processes effectively in construction projects. Key considerations include; ensuring timely and accurate issuance of Payment Notices and Pay Less Notices to prevent smash and grab by other parties, preparing and reviewing payment applications to ensure valuations are in line with contractual expectations. Lastly safeguarding clients’ financial interests by understanding the impact of smash and grab adjudications.
Landmark Cases
Advance JV & Ors v Enisca Ltd [2022] EWHC 1152 (TCC): An adjudicator ruled that the respondent failed to issue a valid pay less notice in response to the claimant’s interim application. The Court found that payless notices must clearly relate to the specific application they intend to address.
AM Construction v The Darul Amaan Trust [2022] EWHC 1478 (TCC): This case established that a “smash and grab” adjudication reward must be paid before initiating a true value adjudication or before the decision can be relied upon or enforced.
Recent Success for DRS
Panning the focus to our internal operations, our DRS team has achieved success on a notable smash and grab adjudication.
After a Contractor submitted an interim application to the Employer’s agent, neither a payment notice nor a payment less notice was provided within the required time frame. The Employer contended that this oversight occurred because the payment application was submitted concurrently with discussions regarding the final account. However, the Adjudicator determined that, despite the submission of both documents, the Employer had received a valid interim application. As a result, with support from the DRS team, the Contractor was awarded £288,886.78.
NB: Do not stress too much about losing a smash and grab adjudication; you can still pursue a true value adjudication! Curious to learn more? Be sure to catch our next blog.