In VMA Services Ltd v Project One London Ltd [2025] EWHC 1815 (TCC), the Court confirmed that that a party may, as a defence to a true value adjudication, raise the fact that a sum would be due to them in a smash and grab adjudication, even if that party has not yet issued that smash and grab adjudication.
Background
In October 2023, Project One London ("POL"), a commercial and residential contractor, engaged VMA Services Ltd ("VMA"), an electrical mechanical subcontractor for the design and installation of mechanical works at a number of POL's properties.
On 21 June 2024, VMA's application for Payment No. 8 was submitted. The gross sum of the application was £274,259.81, with a net sum due of £106,434.88. POL did not serve a valid payment notice or a pay less notice in response to that application. The £106,434.88 therefore became the notified sum due for payment by the final date for payment.
POL did not pay the £106,434.88 due to VMA. VMA did not, however, commence a smash and grab adjudication in respect of the same.
On 16 December 2024, POL referred a true value dispute to an adjudicator for determination. VMA argued that POL's failure to pay the notified sum of £106,434.88 was a defence to POL's true value adjudication, even though VMA did not have a decision from a previous smash and grab adjudication.
The adjudicator ultimately found in favour of VMA and concluded that VMA had provided a valid application for payment and POL had failed to issue a valid payment notice and/or pay less notice. The adjudicator concluded: "Where a party has failed to comply with its immediate payment obligation in respect of a notified sum, it is not entitled to adjudicate on the true value dispute under the contract or otherwise.
The adjudicator directed POL to pay VMA £106,434.88 plus interest.
POL did not pay the sums awarded so VMA sought to enforce the adjudicator's decision. In the enforcement proceedings, Adrian William KC upheld the adjudicator's decision.
In the enforcement hearing, POL argued that the adjudicator did not have jurisdiction to make a financial award to VMA, as the responding party, and in doing had breached the principles of natural justice.
Adrian William KC rejected this argument and found that the adjudicator did have jurisdiction to order payment of the sums awarded. He found that the Scheme for Construction Contracts is clear that “the decision of the adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined”.
Although there are disputes where the adjudicator will not have jurisdiction to make a monetary award in favour of a responding party, this principle does not apply to the current facts. This is because there is already an existing determination enforcing a statutory payment obligation.
Adjudication is subjugated to the immediate payment obligation under section 111 of the Housing Grants, Construction and Regeneration Act 1996 ("the Act"). Adrian William KC cited Bexheat Ltd v Essex Services Group Ltd [2022] EWHC 936 (TCC) which established that the right to commence a true value adjudication is subject to a party having complied with its obligations pursuant to section 111 of Act to pay the notified sum, whether or not a contractor has obtained an adjudication award in its favour.
Key takeaways
This case is a stark reminder that parties cannot circumvent paying a notified sum due, even in circumstances where the other party has not yet referred a smash and grab adjudication. Parties must ensure that valid payment and payless notices are served on time to avoid the risk of a smash and grab adjudication being commenced, but also remember that non-payment of a notified sum may be raised as a defence in an adjudication at a later date.
