Employer not permitted to commence ‘true value’ final account adjudication (Broseley London v Prime Asset Management)

Employer not permitted to commence ‘true value’ final account adjudication (Broseley London v Prime Asset Management)

In proceedings to enforce an adjudicator’s decision for the amount stated in a contractor’s interim payment application, the Technology and Construction Court declined to grant a stay of execution to allow a ‘true value’ adjudication to take place in respect of the final account. In the view of the court, permitting the employer to commence such an adjudication, in circumstances where it had not paid the amount awarded by the adjudicator, would run contrary to S&T v Grove.

Broseley London Ltd v Prime Asset Management Ltd (Trustee of the Mashel Family Trust) [2020] EWHC 944 (TCC)

What are the practical implications of this case?

The Court of Appeal’s ruling in S&T v Grove [2018] EWCA Civ 2448181 ConLR 66 confirmed that an employer who has failed to give a valid payment or pay less notice is nonetheless entitled to bring an adjudication to determine the ‘true value’ of the interim payment application in question. However, it can only do so once it has paid the amount stated in the contractor’s interim payment application (the ‘notified sum’). See News Analysis: Court of Appeal confirms right to adjudicate true value of the works in absence of payment/pay less notice (S&T v Grove Developments).

The present ruling indicates that where an employer has failed to give a payment or pay less notice, and has not paid the notified sum, it might also be precluded, in certain circumstances, from commencing an adjudication to determine the final account. On the facts of this case, it appears to have been relevant that the amount of the final account largely depended on the interim payment in question.

What was the background?

Prime appointed Broseley to carrying out refurbishment works at a property in Chelsea, London. In July 2019, Broseley sent interim payment application 19 to Prime, in respect of which Prime failed to give a valid payment or pay less notice. In September 2019, an adjudicator awarded Broseley the amount stated in its interim payment application (Decision 1). In a later adjudication, the adjudicator declared that Broseley had lawfully terminated the contract at the end of September 2019 (Decision 3).

Broseley applied for summary judgment to enforce Decision 1. Prime did not oppose summary judgment, but applied for a stay of execution for around two months to allow a ‘true value’ adjudication to take place to determine the final account. The specific basis put forward for the stay was that Broseley’s financial position rendered it probable that it would be unable to repay the amount awarded in Decision 1 if required (per Wimbledon v Vago  [2005] EWHC 1086 (TCC)101 ConLR 99 and Gosvenor v Aygun [2018] EWCA Civ 2695182 ConLR 38).

What did the court decide?

It was accepted that, following S&T v Grove, Prime was not entitled to commence a true value adjudication in respect of interim application 19 as it had not paid the amount awarded by the adjudicator in Decision 1. However, here the issue was whether Prime could commence a true value adjudication in respect of the final account.

The court had regard to that fact that Decision 3, which concluded that Broseley had been entitled to terminate, had been based on Prime’s failure to pay sums due to Broseley, in particular the amount awarded in Decision 1. In the view of the court:

‘While the S & T decision does not expressly concern the present situation, where what is suggested as [sic] the possible subject of an as yet unstarted adjudication is the determination of a notional final account where the amount of that final account would be dependant on the validity of Decision 1, the ability to mount such an adjudication following upon Decision 3 attacking the validity of that Decision without prior payment of the amount awarded in Decision 1 would be a remarkable intrusion into the principle established in S & T: it would permit the adjudication system to trump the prompt payment regime...’

Accordingly, it was not open to Prime to commence a final account adjudication without first having paid the amount awarded in Decision 1. Therefore, there was no justification for granting a stay.

The court also noted that it would not have been willing to grant a stay for Prime to bring litigation proceedings to determine the final account due to Prime’s failure to pursue its claim with diligence.

Finally, the court briefly considered the arguments put forward by Prime as to Broseley’s financial situation. The court’s observations are largely fact-specific, but it is worth noting its conclusion that, while the coronavirus (COVID-19) pandemic made the assessment of Broseley’s financial position more difficult, it was not possible to say that, because of coronavirus, Broseley would be unable to repay the judgment sum.

Case details

  • Court: High Court of Justice, Business and Property Courts, Technology and Construction Court (QBD)
  • Judge: Mr Roger Ter Haar QC
  • Date of judgment: 21 April 2020

Related Articles:
Latest Articles:
About the author:

Jon is Head of the Built Environment Group at Lexis®PSL.

Jon trained at Hogan Lovells and qualified into the firm's construction disputes team. Jon has experience of acting for various parties in relation to disputes arising out of construction and engineering projects in various jurisdictions. Jon has acted for clients in TCC litigation, arbitration, adjudication and mediation as well as providing advice on various aspects of construction and engineering projects.