In a much anticipated judgment handed down this morning (7 November 2018), the Court of Appeal has confirmed that employers under construction contracts have the right to refer to adjudication a dispute about the "true value" of a contractor's interim application, even if the employer has missed serving a payment notice and a pay less notice.
The Court of Appeal explicitly stated, however, that an employer must "pay first, argue later". So it must first pay the contractor the amount applied for, before being able to commence a "true value" adjudication.
Whilst the judgment overrules the line of cases which provided the basis for the practice of contractors’ “smash & grab” adjudications, the requirement that an employer must first pay the contractor the amount it applied for could see contractors continue to pursue such claims in the future. The Court of Appeal recognised that this could leave employers exposed in contractor insolvency situations.
The decision, Grove Developments Limited v S&T (UK) Limited, is likely to generate a huge amount of commentary and debate in the construction industry (as did the first instance judgment).
I was pleased to lead the team at Macfarlanes at first instance and in the Court of Appeal with my colleague Richard Rowlatt, alongside Alexander Nissen QC. Our client, Grove Developments, was successful on both occasions.