Smash and grab vs. true value – can you argue both within one adjudication?

In the recent case of Bellway Homes Limited v Surgo Construction Limited[1] the Court held that an adjudicator had jurisdiction to make an award on a ‘smash and grab’ basis or, in the alternative, a ‘true value’ basis within the remit of the same adjudication.

Background

Surgo Construction Limited (‘Surgo’) subcontracted Roundel Manufacturing Limited (‘Roundel’) in connection with the supply and installation of kitchens for a development. Bellway Homes Limited (‘Bellway’) had engaged Surgo as main contractor.

On 22^nd December 2022 Roundel made an interim application for payment (‘AFP’) in the sum of £152,225.23 incl. VAT. Roundel contended that Surgo did not issue a payment notice, nor any valid pay less notice in respect of this payment cycle.

Roundel subsequently referred the matter to adjudication. In the Notice of Adjudication, Roundel sought payment on the basis that the amount in Roundel’s AFP became the notified sum, or in the alternative, Roundel sought “an amount due up to end December 2022, calculated on a substantive basis, in such sum as the Adjudicator shall decide.”

The Adjudicator decided that Roundel’s AFP was not a valid payment application because it was not compliant with the statutory requirements. The AFP did not, therefore, create a notified sum entitling Roundel to payment of the amount stated therein. As such, the Adjudicator turned to consider the parties’ entitlements under a ‘true value’ valuation. In doing so, the Adjudicator decided that Surgo was indebted to Roundel in the sum of £148,431.70 plus interest and VAT.

Roundel assigned all of its rights in the sums due under the Adjudicator’s decision to Bellway and Bellway applied to the Court to enforce the Adjudicator’s ‘true value’ decision by way of summary judgment.

The parties’ respective positions

Surgo opposed the proceedings on a jurisdictional basis, contending that:

1. Multiple disputes were referred without consent and subsequently determined by the Adjudicator, when no jurisdiction to do so existed.
2. Alternatively, if there was jurisdiction to determine the dispute, that jurisdiction was then exceeded by the Adjudicator in going on to determine a true value payment due to Roundel – having already decided that the AFP was invalid in the context of the ‘smash and grab’ aspect of the adjudication.

Bellway rejected both challenges, contending that:

1. Only one dispute was referred (i.e. the sums due for payment on the AFP) and the Adjudicator was asked to determine this by one of two routes (either a ‘smash and grab’ route or in the alternative, a ‘true value’ route); and
2. On rejecting the ‘smash and grab’ route, the Adjudicator proceeded to do exactly what he was requested to do and assess the true value of the AFP.

The Court’s decision

The Judge held that the Adjudicator was not being asked to decide multiple disputes. In providing his reasoning at paragraph 32 of the judgment, DJ Baldwin considered that the dispute can be straightforwardly described as a single, disputed claim for a sum due.

As to whether the Adjudicator exceeded his jurisdiction by going on to determine a true value payment, the Court held that jurisdiction had not been exceeded. Two alternative arguments had been put to the Adjudicator and the Adjudicator considered both.

In rejecting the two jurisdictional arguments raised by Surgo, the Court awarded Bellway summary judgment in the amount claimed.

A final thought

The Court’s decision in this case does not provide explicit authority that parties can bring ‘smash and grab’ and ‘true value’ arguments within one adjudication. What it does do is suggest that, if framed correctly, a ‘true value’ and’ smash and grab’ adjudication can be brought within the confines of a single Notice of Adjudication as a means of advancing two alternative routes to recovery. If a notice were to be framed incorrectly then this may leave the Adjudicator’s decision open to jurisdictional challenges within the adjudication itself and at the enforcement stage.

As considered by Surgo’s barrister in the trial, if it were possible to conjoin ‘smash and grabs’ and ‘true values’ into one dispute then this would inject uncertainty into the adjudication process both in terms of where to concentrate efforts and how to fight it. Should a party solely hang their hat on a smash and grab? Or should they throw everything at it to cover a true value assessment as well?

Speak to our specialist Construction and Engineering lawyers

Our specialist team at IBB is on hand to advise from the outset, whether it be advising on the validity of a payment notice or assisting in respect of a dispute which has materialised.

If you have any questions about this blog, please speak to one of our construction team on 03456 381381 or email construction@ibblaw.co.uk.

Alternatively, contact Samantha Beasley on 01895 207283 or Samantha.Beasley@ibblaw.co.uk.

[1] [2024] EWHC 10 TCC.