Broseley London Limited v Prime Asset Management Limited [2020]

In the recent case of Broseley London Limited v Prime Asset Management Limited [2020] EWHC 944 (TCC), Broseley applied to enforce an adjudicator’s decision in its favour in the sum of approximately £485,000 plus VAT.  Prime did not deny that judgment should be entered but applied for a stay of execution.

Broseley is a small, family run construction company.  Prime contracted with Broseley for Broseley to carry out refurbishment works at a grade II listed building in the sum of just under £1.5 million (excluding VAT).  In 2019, Broseley issued a payment application in the sum of £485,216.17 + VAT (Valuation 19). Prime did not issue a payment notice and, although Prime issued a pay less notice in respect of the application, the pay less notice was late and therefore invalid. As such Broseley commenced adjudication for payment of the sum in Valuation 19 with the adjudicator finding in favour of Broseley.

Two further adjudications followed: an adjudication in respect of the next valuation payment certificate 20 and an adjudication regarding whether or not Broseley’s termination of the contract in September 2019 had been lawful.  In the absence of any payment from Prime in satisfaction of the decision in the first adjudication, Broseley commenced enforcement proceedings.  Whilst Prime did not deny that Broseley should be entitled to summary judgment to give effect to the decision in the first adjudication, it sought a stay of execution pending the conclusion of a further adjudication on the ‘true value’ of the works for the purposes of the final account.

One of the questions for the court was whether Prime could raise a ‘true value’ final account adjudication and await the outcome of this adjudication without first paying the sum already awarded to Broseley in adjudication number 1.

Many readers will be aware of the principle set out in the Court of Appeal decision in S&T (UK) Ltd v Grove Developments [2018] EWCA Civ 2488 namely that a party faced with an adjudicator’s decision based on a smash and grab for failure to serve the requisite notices in respect of a particular application, cannot start a ‘true value’ adjudication as to that application until it has paid the sum due under that decision.

Could Prime raise a true value final account adjudication without first paying the sum awarded in adjudication no. 1?

The Judge held that a party could not challenge the decision of the adjudicator in another adjudication without first paying the amount held due.  As such, it was not open to Prime to commence an adjudication to establish the true value of the final account without first paying the sum due in adjudication no.1.

The Judge then considered the application for a stay pending resolution of the final account in potential Part 7 (court) proceedings taking into account the following:

Did Prime act with due diligence?

The Judge found that Prime had not acted with due diligence in pursuing its cross claim having taken no steps to obtain a ruling from the court regarding the amount due following the adjudicator’s decision.  On this basis, the application for a stay of execution was refused.  However, the Judge went on to set out his conclusions in respect of two of the other grounds argued by Prime.

Was it improbable that Broseley would be able to repay the judgment sum at the end of trial?

The Judge considered the question of whether it was improbable that Broseley would be able to repay the judgment sum at the end of the trial. This was one of the grounds put forward by Prime in seeking a stay so that it could seek a resolution of the final account rather than pay Broseley first and hope to subsequently recoup any overpayment.

The Judge took the view that since Part 7 proceedings had not yet been commenced, the final determination of the issues between the parties was unlikely to conclude until the summer of 2021. Given that this was some time away and the fact that COVID-19 may have an impact on future projects, it was difficult to assess what Broseley’s financial position would be at the final determination date and, in particular, whether Broseley would be able to repay the judgment sum.

The Judge concluded that had Prime moved with due diligence, it could already have had a result by way of adjudication before the COVID-19 pandemic and at a time when, based on its current financial position, it is likely that Broseley would have been able to repay the sum awarded.

Therefore, for the reasons set out above, the Judge held that Prime had not made out this particular ground which again was fatal to its application for a stay.

Was there a real risk that any future final judgment would go unsatisfied by reason of Broseley reorganising its affairs with the purpose of dissipating or disposing of assets?

The Judge also considered whether there was a real risk that Broseley would dissipate or dispose of its assets in order to avoid paying any future final judgment sum.

The Judge said that this situation was only likely to arise in exceptional factual circumstances and concluded that Prime had failed to satisfy the heavy burden upon it of establishing the allegation that Broseley’s directors would be likely to take steps to dissipate the company’s assets in order to prevent the judgment sum being repaid.

In the circumstances, Broseley was awarded judgment, with no stay of execution as sought by Prime.

For more information on the article above please contact Patrick Blake and Miriam Soteriou.