'Smash and grab' as defence: VMA Services Limited v Project One Limited [2025] EWHC 1815 (TCC)

Background

VMA Services Limited ("VMA") was employed by Project One Limited ("POL") under a sub-contract order incorporating the JCT Design and Building Sub-Contract Agreement Conditions 2016 for the design and installation of mechanical works

VMA made an application for payment in June 2024. POL failed to serve a Payment Notice or a Pay Less Notice timeously. In December 2024, POL served a notice of intention to refer the matter to an adjudicator in the form of a True Value Adjudication ("TVA")

The adjudicator found that VMA had submitted a valid payment application, POL had not provided either a Payment Notice or a Pay Less Notice and, therefore, POL were obliged to pay VMA a notified sum of just over £106,000

POL did not pay the notified sum and VMA sought summary judgment to enforce the adjudicator's decision

Judgment

In a succinct judgment, Adrian Williamson KC established the following principles:

• One of the key aims of the Housing Grants and Construction Regeneration Act 1996 (the "Act")  and the Scheme for Construction Contracts 1998 (the "Scheme") was to improve cash-flow with the industry; 

• There is ample case law that the terms of the Act and the Scheme meant that where a party had not paid a validly due notified sum, that party was not entitled to commence or rely upon a true value adjudication under s108 of the Act;

• The above principle applies even in the absence of a 'smash and grab' adjudication to force payment of the notified sum;

• A responding party to an adjudication is entitled to raise a wide variety of matters by way of defence and counter-claim without necessarily infringing the jurisdiction of the adjudicator; and

• Generally speaking, a responding party will not be able to make monetary recovery arising from an independent defence; however if an adjudicator finds in the course of considering a valid defence that a sum is validly due to a responding party they can make an order for payment

• It followed from the above:As a notified sum was payable and it had not, in fact, been paid, POL's TVA could not validly proceed

• There was no need for TMA to initiate an adjudication as a referring party to secure payment of the notified sum

• The court ordered that the adjudicator's decision be enforced

Key takeaways

1. It is crucial that parties understand and follow the Payment Notice/Pay Less Notice provisions of their contracts. 
2. Any party considering a true value adjudication must carefully consider whether or not any notified sum is due in the matter under dispute. If there is a notified sum due and it is unpaid, the adjudicator is unlikely to consider a true value adjudication as valid – a 'smash and grab' defence can be successful. 
3. If a notified sum is payable as a matter of law, an adjudicator can award payment of that sum – parties to an adjudication must therefore carefully consider their exposure in this regard. 

To  find out more about any of the points raised, please contact us.

This article was written by James Callender and Alice Flynn.