The tale of Grove and S&T has been commented on before but the latest round in the conflict has been long heralded as the potential end to the "smash and grab" adjudications, or adjudications giving rise to payment due to technical or time based errors on the part of an Employer in response to an interim (or indeed final) application for payment.
S&T v Grove, reported on 7 November 2018, was an appeal from the TCC, following "a lull in hostilities while the parties marshalled their legal battalions"; a first adjudication; a "second round of the battle" again, at adjudication; and a third before a decision was issued by the "theatre of war, the Technology and Construction Court" in February 2018.
My colleague Alex wrote about paying less as part of our HGCRA anniversary series and this latest round of the Grove conflict is a further development of that theme.
Mr Justice Coulson, with whom Lady Justice King and Lord Justice Longmore agreed, found that in this case, the Employer's pay less notice was valid and accordingly no sums fell due to be paid by the Employer to the Contractor. The court did not require to go any further to answer the second question put to it. That was whether, in the event of a failure to issue a valid pay less notice, an Employer is entitled to refer or pursue a claim in adjudication to determine the correct value of the works, and thereby seek to recover sums paid as a consequence of the absence of a valid notice. If so, at what point can that determination be made? Given its importance to the construction industry and prior conflicting decisions, much of the judgment addresses this point of significance, albeit it was academic in the particular circumstances.
The court held that where an Employer fails to issue a valid pay less notice (which was not the case here) it can refer a separate dispute to adjudication to determine the true value of the works at the relevant time. However that referral cannot take place prior to payment of the Notified Sum. The HGCRA created the prompt payment regime. It also gave rise to the adjudication regime and the court ruled that the latter is not and ought not to be a tool to beat the former. The payment obligation is immediate. The question of whether the actual sums paid were too much (or too little) is to be determined after payment.
Mr Justice Coulson accepts that the timing question may appear to be harsh in particular scenarios for example where an Employer requires to pay out significant sums to a contractor. That payment needs to be made before a proper analysis of the value of the actual works which might result in a later order for repayment or restitution. What happens if there is an intervening insolvency? The answer appears to be that where there is a risk or perceived risk of insolvency an Employer should be careful to avoid the issue by abiding by its contractual (or statutory) obligations in connection with paying less.
This is of course an English case but as with many of the authorities in connection with adjudication is likely to be followed by the Scottish Courts. The running total is one and a half adjudications apiece but Grove have succeeded in both the TCC and the Court of Appeal. Is there a cease fire in the offing or might we not have heard the last of this issue?