25 January 2017

A "smash and grab" adjudication is where a contractor argues that a payment or pay less notice has not been given either at all or in time. The consequences of an employer failing to issue the appropriate notice on time is that the amount applied for by the contractor becomes the amount payable. As such, the lack of a valid notice by the employer can be a powerful weapon for a contractor. But recently, the TCC has adopted a tough approach to contractors wishing to benefit from an alleged failure by an employer to issue its notice.

In Leeds Council v Waco [2015] EWHC 1400 (TCC), the contractor submitted 20 interim applications later than stipulated in the contract. The employer still paid against those applications without dispute. For its 21st interim application, the contractor made this early. No payment or pay less notice was given by the employer. The contractor claimed it was entitled to the full amount of its 21st application. The court instead decided that the conduct of the parties indicated that there was an implied term that interim applications could be submitted late – but not early. Consequently, the contractor's 21st interim application had not been made in accordance with the contract and no entitlement arose.

In Caledonian v Mar City [2015] EWHC 1855 (TCC) the court held that if contractors are going to launch a "smash and grab" adjudication, the relevant payment application must be spot on in accordance with the contract. In this case, the contractor’s interim application was not held to be valid due to a number of deficiencies and therefore the employer’s lack of payment or pay less notice did not matter. The judge stated that the contractor should not be entitled to what he called a ‘wholly undeserved windfall’ if its own interim application is not set out with proper clarity and in accordance with the contract.

The message from the TCC is clear. Both parties must adhere to the terms of their contract. If a contractor has not made a valid application for payment, it cannot argue that a failure by the employer to issue appropriate notices entitles it to payment. Equally however, if an application has been made properly, employers cannot rely on these cases to absolve them from a failure to issue the proper payment and pay less notices either on time or at all.

This article was written by Catherine Gilbert.

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Steven James

Steven James Partner

  • Construction and Engineering 
  • Energy and Utilities
  • Construction Disputes

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