Smash & Grab Adjudications

Adjudication is a rapid 28 day dispute resolution process for resolving disputes arising under construction contracts. Under Part 2 of the Housing Grants, Construction & Regeneration Act 1996 (as amended) (HGCRA) parties to all construction contracts (a term defined in HGCRA) have the right to adjudicate, unless the contract is one involving works to a dwelling which one of the parties to the contract occupies, or intends to occupy, as his residence, in which case there is no right to adjudicate.

A “smash and grab” adjudication is one where a payee (the party to be paid) starts a claim against a payor (the paying party) alleging that the payor is in breach of its payment obligations to the payee. Like the right to adjudicate, those payment obligations also arise under HGCRA. Specifically the payee alleges that it has served a valid Payment Application, but the payor has not then served either a valid Payment Notice or Pay Less Notice in response by the deadlines for serving those notices. That being so and because the final date for payment has also now passed, the payee claims that it is entitled to be paid the sum contained in its Payment Application.

This is a strict liability sort of dispute, ie if the above circumstances do exist, there will be little or nothing that the payor can say in its defence. It will also be unable to cross-claim if it thinks that it has its own claim against the payee. A smash and grab dispute has nothing to do with whether the sum contained in the Payment Application is correct or not on a true valuation of the works that it refers to. It may in fact be that the Payment Application is hugely inflated and payment of it will cause the payor considerable problems. The payor will have to pay up and then try to recover any sum that it says it has had to overpay. It may try to do that eg by a correction on the next interim payment cycle (often the next month).

Smash and grab claims are common and can have severe consequences for a payor. Therefore close attention must be paid by the parties to all their payment obligations throughout the project.

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