"Smash and Grab" Imperial Chemical Industries Limited v. Merit Merrell Technology Limited

Published 5 September 2017

Executive summary

This case reminds parties of their important right to make claims for payment where the all-important contractual dates concerning interim payments have been missed.

The facts

Merit Merrell Technology Limited ("MMT"), a specialist engineering piping manufacturer, entered into a contract with Imperial Chemical Industries Limited ("ICI") for works associated with the construction of a new paint manufacturing facility for ICI in Northumberland.

The claim in the TCC before Fraser J concerned liability between the parties in respect of the contractual terms; the quality of the welding by MMT; repudiation of the contract and recovery of overpayments.

Before this trial commenced, the parties had been involved in no less than four adjudications.

In Adjudication 1, MMT sought payment of the sum claimed in its Interim Payment Notice 22 in the sum of £7,559,514.76. The adjudicator found for MMT and ordered that ICI pay.

Adjudication 2 concerned entitlement to certain project documents, and delivery up of those documents, and Adjudication 3 concerned whether or not ICI had repudiated the contract.

In Application 4, MMT sought payment of its Application for Payment No.23. This application included the value of Application No.22, which had already been ordered to be paid by the adjudicator in Adjudication No.1. The Adjudicator decided that the balance of £816,093 was due and payable by ICI and he ordered that this was paid forthwith.

Decision

It is less the decision in this case which is of interest to construction professionals, but more the comments made by Fraser J in respect of what have become termed "smash and grab" adjudications.

Fraser J cited with approval Coulson J in Hutton Construction Ltd v Wilson Properties (London) Ltd [2017] EWHC 517 (TCC) where he said:

“What, I think, nobody could have predicted at the time of Caledonian Modular was the proliferation of what I understand are (unhappily) called 'smash and grab' cases: those adjudication claims (usually, but not always, brought by contractors) based on the contention that the other party has failed to serve proper or timeous applications for payment or payment/pay less notices, thereby automatically entitling the claiming party to the sums claimed, no matter how controversial. The significant increase in these sorts of claims seems to me to arise principally from the ill-considered amendments to the 1996 Act, and the over-prescription of the payment terms included in the standard forms of contract, which have led to provisions of unnecessary complexity.”

In spite of the latter remarks of Coulson J, Fraser J noted that the term 'smash and grab' had pejorative overtones and it was a term "best avoided". He further remarked that Parliament had decided that certain timing requirements must be met. If employers or third party certifiers fail to comply with those legal requirements, then the party seeking payment becomes entitled to the sum (as an interim payment) for which application has been made. To describe an attempt, or the adjudication itself, by a party to enforce these legal rights as a “smash and grab” entirely missed the point. Further, it did not matter that an adjudicator in such a dispute has a more straightforward task than in other adjudications on other more complicated facts.

Comment

Whilst it is clear that there has been a proliferation of such adjudications in recent years, Fraser J made it clear that such claims should not be undermined and are of the same importance to other more complex disputes referred to adjudication.

It is, after all, the will of Parliament that liquidity in the industry should be maintained. Further, most contracts contain a provision whereby the project manager can correct any wrongly assessed amount due in a later payment certificate.

This case is yet another reminder to employers and contractors of the importance of issuing payment notices and payless notices on time and in accordance with the contract. But more importantly, this case serves to uphold the rights of one party against the other for failing to meet prescribed deadlines. Such adjudications should not be met in the industry with disapproval or judgement.