Broseley London Ltd v Prime Asset Management Ltd [2020] EWHC 944

May 2020
James Vernon and Charlotte Gooch

The latest Technology and Construction Court (‘TCC’) judgment on payment and the enforcement of an adjudicator’s decision has been handed down. The Judge applied the “smash and grab” and “pay now argue later” principles as confirmed in the recent Court of Appeal decision of S&T (UK) v Grove Developments Limited (click here for case note).

Background

Broseley London Limited (‘BLL’) is a construction company which specialises in the building and refurbishment of residential properties and listed buildings. Prime Asset Management Limited (‘PAML’) contracted with BLL to carry out refurbishments works to a grade II listed building in London, for the contract sum of £1,485,800.395 (‘the Contract’).

On 11 July 2019, BLL submitted a payment application in the sum of £485,216.17 (‘Valuation 19’), PAML failed to give a Payment Notice and the Pay Less Notice given on its behalf was late.

  • Adjudication 1

On 1 August 2019, the sum included within Valuation 19 fell due. On 9 August 2019, BLL commenced an adjudication to obtain a decision confirming that the sum should be paid to it. The adjudicator issued its decision on 12 September 2019, confirmed that PAML should have paid BLL the sum plus VAT by 1 August 2019 and awarded contractual interest (‘Adjudication 1’).

  • Adjudication 2 and 3

Two adjudications followed, one in relation to Valuation 20 (‘Adjudication 2’) and another which held that BLL had lawfully terminated the contract (‘Adjudication 3’) on the basis that PAML had failed to pay sums due to BLL, in particular the amount due pursuant to Valuation 19 (as confirmed in Adjudication 1).

  • Enforcement proceedings

BLL applied to the TCC for summary judgement to enforce the adjudicator’s decision in Adjudication 1. PAML did not oppose BLL’s application, but sought a stay of execution so as to allow PAML to commence Part 7 proceedings to determine the true value of the account.

PAML’s application for a stay of execution

As set out above, by the end of March 2020, PAML no longer opposed BLL’s application to enforce the decision in Adjudication 1, but PAML applied for a stay of execution for payment.

PAML sought a stay of execution of around two months in order to allow a “true value” adjudication to take place – PAML’s contention was that on a full evaluation of the account, a significant sum would be due from BLL to PAML.

PAML’s application sought to establish that BLL’s financial position was weak. PAML made its application on the following four grounds:

  1. the probable inability of BLL to repay the judgment sum at the end of the trial of the underlying issues;
  2. BLL’s financial position being worse than its financial position at the time when the Contract was made;
  3. BLL’s financial position was not due to PAML’s failure to pay the sum awarded by the Adjudicator;
  4. a real risk that any future final judgment would go unsatisfied by reason of BLL organising its affairs with the purpose of dissipating or disposing of the sum awarded in Adjudication 1 so that it would not be available to be repaid.

The Decision

The question for the Judge was : could PAML raise a “true value” final account adjudication without paying the sum awarded in Adjudication 1?

Mr Roger ter Haar QC sitting as a Deputy High Court Judge in the TCC highlighted the relevance of two points:

  1. the delay by PAML in seeking resolution of the final account – despite accepting there was a genuine dispute over the final account, in the Judge’s view, the delay was “a crucial factor” in that PAML had been “extremely slow to show any signs of any real desire to grapple with the amount of the true value of the account”; and
  2. the fact that by time of the hearing of this application, there were no extant adjudication or court proceedings already commenced seeking a resolution of the underlying issues between the parties.

Having considered the factual record of steps taken or not taken by PAML in the various adjudications and PAML’s failure to pursue with due diligence a full analysis of the final account in proceedings, the Judge refused PAML’s application for a stay of execution.

The TCC held that it was not open to PAML to challenge the decision in Adjudication 1 in a further adjudication, without first paying the amount due as directed by the adjudicator in Adjudication 1. The decision in Adjudication 1 of 12 September 2019 was enforced, with judgment against PAML in the sum of £485,216.17 plus VAT and interest, to be paid within 14 days of 9 April 2020.

For completeness, the Judge did go on to consider the four grounds put forward by PAML:

In relation to the 1st ground, the alleged probable inability of BLL to repay the judgment sum at the end of the trial of the underlying issues, the TCC held that PAML had not made out this ground, which was again fatal to its application. Therefore, the 2nd and 3rd grounds did not need to be considered.

The 4th ground was a serious allegation and the TCC held that PAML failed to discharge the heavy burden of proving this allegation.

Comment

This latest decision is in line with the decision in Grove (click here for case note) and subsequent case law (see Davenport Builders Ltd v Greer & Anor -previous case note here) and is particularly relevant in the current crisis with many businesses facing an uncertain future.

The decision highlights the importance for employers to know and comply with the notice and payment provisions of the Housing Grants, Construction and Regeneration Act 1996 – in particular, ensure that the date for service of any pay less notice is not missed, and that any notice provisions are complied with as to the correct contractual method of service and the correct addressee.

The case also stresses the importance of avoiding delay, especially in relation to the finalisation of a final account where an employer is confident it will resolve in its favour. Indeed, PAML’s delay in pursing the final account was critical in the TCC’s analysis.

For further information please contact James Vernon.

Download PDF