Tuesday, 21 April, 2020

[2020] EWHC 044 (TCC)

TCC

Mr Roger Ter Haar QC

Key terms:

Adjudication ; Stay of execution ; Delay

Broseley London Limited (BLL) entered into a contract with Prime Asset Management Limited (PAML) under which BLL would carry out refurbishment works at a grade II listed building in Chelsea, London.

On 11 July 2019, BLL made a Payment Application to PAML for £485,216.17 plus VAT (“Valuation 19”). PAML failed to give a Payment Notice and the Pay less notice was late. No payment was made to BLL, and BLL subsequently commenced adjudication proceedings. The Adjudicator found in BLL’s favour and ordered PAML to pay the sum by 1 August 2019 (Decision No.1). BLL has since commenced proceedings to enforce the Adjudicator’s Decision. In addition to Decision No. 1, there have been two further adjudications. The second saw declarations issued in relation to Payment Certificate No. 20 and the third was in relation to BLL’s declaration that it had lawfully terminated the Contract in September 2019.

As of March 2020, PAML has accepted that judgment in relation to Decision No. 1 should be entered against it; however, it now seeks a stay of two months to enable a “true value” adjudication to take place. PAML’s argument is that a proper evaluation of the account between the parties would demonstrate that a substantial sum is due to PAML from BLL.

Mr Roger Ter Haar QC accepted that there was a genuine dispute between the parties as to the final account amount. However it was also acknowledged that there had been a significant time lapse since Decision No. 1 and that during that time PAML had made few attempts to resolve the true value of accounts.

It was PAML’s belief that BLL had served an Adjudication Notice in respect of further sums said to be due on final account. It was on these grounds that PAML sought a stay until the conclusion of that adjudication. However, BLL withdrew this referral, which then raised the question of whether PAML could now start a “true value” final account adjudication without first paying the sum awarded under Decision No. 1.

The Judge stated it would be “a remarkable intrusion to the principle established in S & T” if PAML were able to challenge Decision No.1 in another adjudication without first paying the amount ordered due under Decision No. 1. Concluding that to allow this would “permit the adjudication system to trump the prompt payment regime”, which is what the judgment in S & T declared would not be allowed to happen. It is on this basis that the application for a stay was refused.

The Judge nonetheless went on to consider the first ground of PAML’s application, concerning BLL’s ability to repay the judgment sum. The Judge considered BLL’s financial statements as well as current and upcoming projects, finding that on these facts it seemed likely BLL would be able to repay the sum. However, the Judge acknowledged Covid-19 and the likely impact it will have on projects, concluding “[he] cannot say” whether BLL will be unable to repay the judgment sum. Ultimately, the burden of proof is with PAML and the Judge found that they had failed to make out the first of its grounds.

This case does not sit easily against the decision of Stuart Smith J in Davenport v Greer [2019] EWHC 318 (TCC) which suggested that the Courts would not restrain a party from commencing a true value adjudication prior to discharge of an earlier payment obligation, but rather would not permit a party to rely on that true value decision in any enforcement proceedings, until the party had paid the sum awarded. As such, this case is unlikely to be the last word on the question of when a party can commence a true value adjudication.

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