Make Adjudication Great Again
In the recent case of Broseley London Limited v Prime Asset Management Limited the employer sought a stay on the enforcement of an earlier ‘smash and grab’ decision, i.e. an adjudication where payment is sought on the narrow ground that no payment notice or payless notice has been served and so the sum applied for is due without any investigation into the ‘true value’ of the entitlement claimed.
This is an interesting case for construction professionals to be aware of as it addresses whether a ‘true value’ final account adjudication could be commenced without first paying the sum due in respect of a ‘smash and grab’ adjudication. It also provides helpful commentary on the impact on applications for a stay if a party does not progress its cross-claims with sufficient diligence.
In happier times, the employer contracted with the contractor for the £1.5 million refurbishment of a grade II listed building in Chelsea, London.
Due to the employer failing to issue a payment or payless notices for application 19, the contractor was successful in obtaining a ‘smash and grab’ decision ordering the employer to pay it £485.216.17 (Adjudication 1). There were then two further adjudications decisions relating to a declaration on payment certificate 20 (Adjudication 2), and whether the contractor had validly terminated the contract (Adjudication 3). The reason why the contractor terminated the contract was due to the employer’s failure to pay the sum ordered in Adjudication 1.
While the employer accepted that the ‘smash and grab’ decision was enforceable, it sought a stay of execution for the entire judgment sum in order to allow either a ‘true value’ adjudication to take place in respect of the final account following termination, or court proceedings on the final account to be resolved.
In relation to whether there should be a stay to allow a ‘true value’ adjudication to proceed on the final account, the employer argued that this was permitted because of Adjudication 3, and the fact that the ‘true value’ on the final account was post-termination.
The court rejected this argument and noted that if the employer’s argument was successful, this would be a ‘remarkable intrusion’ into the principle outlined in the case of Grove v S&T. It would permit the adjudication regime to ‘trump’ the payment regime, which is exactly what the court had explicitly said should not be permitted in Grove v S&T.
Turning to whether there should be a stay to allow court proceedings on the final account to be resolved, the court considered the sheer length of time that had elapsed following the issuing of the ‘smash and grab’ decision and the fact that the employer had been ‘extremely slow’ in showing any “real desire to grapple with the amount of the true value of the account”.
The court found that there had been a complete lack of due diligence by the employer in pursuing any court proceedings (and these had not in fact been commenced). This was sufficient to refuse the employer’s application for a stay.
This case sends a clear message to employers that the court does not take kindly to attempts to avoid an adverse ‘smash and grab’ decision. Further, the conduct of parties is always important when considering matters such as applications for stays, as well as potentially having cost implications.
As a final take away, we highlight the absolute importance of complying with contracts’ payment notice provisions to avoid ‘smash and grab’ adjudications arising in the first place.
For more information, please do not hesitate to contact Carolyn Davies or your usual Charles Russell Speechyls contact.