A recent case has clarified the scope of the "Grove principle" (which is that a true value adjudication cannot be started until the notified sum has been paid). Whilst there is not a wholesale ban on adjudications being commenced whilst payment remains outstanding, claims which concern valuations which could have been the subject of a timely payless notice served in respect of the notified sum in question (such as costs of rectifying defects and LADs) cannot be adjudicated upon prior to the payment of that notified sum.
Adjudication Guidance in the UK - The True Meaning of True Value in the context of Smash and Grab Adjudications within the Construction Industry
The Grove Principle
As readers will know, a smash and grab adjudication is one where, in the absence of a valid and timely payment notice and/or payless notice, the payee claims for payment of the sum claimed in the relevant payment application (i.e. the notified sum).
It is accepted law that where a payee is successful, the paying party is entitled to commence its own adjudication proceedings to determine the 'true value' of the works to which the payment application related.
However, as established in S&T(UK) Ltd -v- Grove  EWCA Civ 2448 (Grove), such 'true value' adjudications can only be commenced once the paying party has first complied with its obligation to pay the notified sum (the Grove principle).
An adjudicator will not have jurisdiction to determine a true value dispute where the Grove principle is breached.
In the recent case of Lidl Great Britain Limited -v- Closed Circuit Cooling Limited t/a 3CL  EWHC 3051 (TCC), the scope of the Grove principle was explored.
This has potential implications for employers, particularly when assessing the date on which defects became apparent. The "dividing line" discussed in paragraph 40 of the judgment means that in the commencement of true value adjudications it could open the door for employers to argue that defects came to light after the payless notice deadline or holding back on the notification of defects until later to be on the right side of the dividing line.
- The case is an important reminder of the basic premise under the Grove principle, namely the need to pay the notified sum prior to seeking to commence a true value adjudication.
- Moreover, the case confirms that cross claims (such as those relating to costs of rectifying defects and LADs) will be covered by the Grove principle insofar as they could have been the subject of a valid and timely payless notice in relation to the relevant notified sum. Such claims can therefore only be adjudicated upon following payment of the relevant notified sum.
- The paying party can however commence a true value adjudication for such cross claims provided these arise after the payless notice deadline date. This has potential implications for employers, as noted above.
- Perhaps most importantly, the case reminds us of the importance to always ensure compliance with contractual and statutory requirements and to ensure that requisite notices are served on time.
Our Construction & Engineering team deal with adjudications on a daily basis and would be delighted to discuss any of the issues raised in this article with you further - just get in touch with one of our Key Contacts opposite or your usual contact.
To the Point
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