"Smash and grab" or "true value" adjudication?

In the case of M Davenport Builders Ltd v Greer [2019] EWHC 318, the UK's Technology and Construction Court was asked to resist the enforcement of an adjudicator's determination, based on a failure by the owner to either pay an amount claimed or to issue a "pay less"notice under the Scheme of the UK Act (a "smash and grab" adjudication), on the grounds that the owner had initiated a parallel adjudication, under another adjudicator, on the merits of the claim under the contract (a "true value" adjudication).

Under the first adjudication, the owner was to pay the full amount of £106,000 claimed by the builder under the final payment claim as it had not issued a "Pay Less Notice".  Under the subsequent "true value adjudication", the adjudicator determined that the builder had over claimed, and on the merits the owner was not liable to make any further payment.

While logic would suggest that a true value adjudication would cancel out any earlier smash and grab determination, the legal landscape is somewhat more complex.  The obligation to pay on the first determination is absolute, which would suggest a somewhat surreal situation where the owner pays the amount due under the first adjudication, and is then obliged to reimburse the amount paid in accordance with the second.  Typically, this rather unrealistic scenario would be ignored for what it is. 

However, things get rather more complicated where the payment claim is a final payment claim, and there are issues over the solvency of the builder/payee.  Sadly, this situation is all the more real in the current economic environment of a booming construction industry, resource and supply constraints, and building companies failing with depressing frequency.  In a Davenport scenario, it would not be hard to imagine a situation where a liquidator of a building company might enforce a smash and grab award, and then tell the owner to join the queue behind other preferred creditors when it came to enforcing the true value award.

Mr Justice Stuart-Smith held at paragraph [35] of the Davenport decision that:

"In my judgment, it should now be taken as established that an employer who is subject to an immediate obligation to discharge the order of an adjudicator based upon the failure of the employer to serve either a Payment Notice or a Pay Less Notice must discharge that immediate obligation before he will be entitled to rely upon a subsequent decision in a true value adjudication. Both policy and authority support this conclusion and that it should apply equally to interim and final applications for payment."

Under our own regime, sections 22 & 23 provide that failure to provide a payment schedule results in the amount claimed becoming a debt due recoverable in any court.  Section 79 proscribes any defence, whether by counter-claim, set-off or cross demand.  The only potential basis therefore for resisting payment is by raising an abatement.

On the occasions that this has arisen in New Zealand, the parties have tended to agree to either the consolidation of the adjudication proceedings under section 40 or the extension of jurisdiction under section 38.  But, where the smash and grab adjudication is completed, a similar result to the Davenport decision would be hard to resist.