Broseley London Ltd v Prime Asset Management Ltd

[2020] EWHC 944 (TCC)

BLL is a small family-run company, specialising in the building and refurbishment of properties and listed buildings. PAML contracted with BLL to carry out refurbishment works at one such property. On 11 July 2019 BLL made a payment application, Valuation 19, for the net sum of £485k. No payment notice was given and the pay less notice was late, something confirmed in an adjudication. Two adjudications followed, one in relation to payment certificate 20 and a second which held that BLL had lawfully terminated the contract. On 17 March 2020, PAML accepted that the first decision should be honoured, but sought a stay of execution for the entire judgment sum of about two months in order to allow a “true value” adjudication to take place. PAML said that a proper evaluation of the account would result in a substantial sum being due to PAML from BLL. 

The Judge was prepared to accept that there was a genuine dispute as to the amount of the final account, but he had to set that against the length of time which had passed since the first adjudication decision (September 2019), during which little had been done by PAML to seek to resolve the true state of accounts. The Judge drew attention to the last sentence of paragraph 17.28 of Coulson on Construction Adjudication which says: “a failure by the defendant to pursue its cross-claim or challenge with diligence may itself be a bar to a successful application for a stay of execution”.

Here, there was no dispute that once the application for payment in Valuation 19 had been affirmed by the adjudicator in September 2019, the effect of the CA decision in S & T (UK) Ltd v Grove Developments (Issue 222) was that PAML, not having paid the amount due as held in Adjudication No. 1, could not itself start a “true value” adjudication as to Valuation 19 but had to commence litigation in order to establish the true value, a course which it had not yet taken. 

This raised the question whether PAML could now raise a “true value” final account adjudication without first paying the sum awarded in Adjudication No. 1. PAML suggested that the answer to that question was “yes” because of Adjudication No. 3 and because the “true value” adjudication is of the final account post-termination. However, the basis of Decision No. 3 was that PAML had failed to pay sums due to BLL, including the amount found due in Decision No. 1. The Judge was clear that this would amount to a “remarkable intrusion into the principle established in S & T: it would permit the adjudication system to trump the prompt payment regime, which is exactly what [the CA] said … would not be permitted to happen”.

Although this dealt with the application, the Judge went on to consider the question of whether it was improbable that BLL would be able to repay the judgment sum at the end of the trial of the underlying issues between the parties. The Judge was clear that it was for PAML to make out this ground. 

The Judge had a list of BLL’s current projects and projects which BLL had won. The turnover suggested by that list seemed to him to render it likely that if those contracts were executed BLL would be able to repay the judgment sum in its present financial position. However, the Judge did accept that the Covid-19 emergency measures might well have an impact upon whether all these projects would continue or commence, as the case may be. This made the assessment of BLL’s position more difficult, but the Judge could not say whether because of Covid-19 BLL would in due course be unable to repay the judgment sum. Given where the burden of proof lies, that made PAML’s position difficult.  The PAML application failed. All the Judge could say was that:

“if PAML had moved with due diligence and in accordance with S & T, it could have had a result by adjudication of its alleged entitlements before the Covid-19 crisis blew up, and at a time when BLL would, on my findings, have been able to repay”.

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