Adjudication Case Law Update 2023: Part 2

In the second edition of our 2023 Court Decision Summaries, Kenneth Salmon MCIArb, consultant solicitor at Slater Heelis LLP, summarises five court decisions relating to the enforcement of adjudicators' Awards under the Housing Grants, Construction and Regeneration Act 1996.

In Part 2:

    • Access to courts in adjudication proceedings – application of ‘pay now argue later’ mantra:
      A & V Building Solutions Ltd v J & B Hopkins Ltd [2023] EWCA Civ 54 King LJ, Coulson LJ and Popplewell LJ Judgment 27 January 2023
    • Attacking an adjudicator's decision on enforcement:
      J & B Hopkins Ltd v A&V Building Solution Ltd [2023] EWHC 301 (TCC), Mr Roger Ter Haar KC Judgement 15 February 2023
    • Fees – Bias – whether the adjudicator's demand for security amounted to threat to exercise a lien over the award:
      Nicholas James Care Homes Ltd v Liberty Homes (Kent) Ltd [2023] EWHC 360 (TCC) Mr Recorder Andrew Singer KC judgment 21 February 2023
    • Natural Justice – challenge to enforcement of award and claim for final determination of the validity of final account statement:
      Atalian Servant AMK Ltd v B W (Electrical Contractors) Ltd [2023] ScotCS CSOH 14 Lord Sandison (16 February 2023)
    • Stay of Execution:
      WRB (NI) Ltd v Henry Construction Projects Ltd [2023] EWHC 278 (TCC), Pepperrall J. Judgment 10 February 2023)

 

Legislation

The “Act” means the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 Pt 8. The 'new' provisions apply to contracts entered into on or after 1 October 2011. The Act applies to England and Wales, Scotland and Northern Ireland.

The main regulations are contained in the Scheme for Construction Contracts (England & Wales) Regulations 1998 (the 'Principal Regulations').[1] They have been amended by the Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011[2] (the 'new Regulations'). The new Regulations apply only to contracts for construction operations in England entered into on or after 1 October 2011. For earlier contracts, the Principal Regulations apply. Northern Ireland has its own scheme: the Scheme for Construction Contracts in Northern Ireland 1999 as amended by the Scheme for Construction Contracts in Northern Ireland (Amendment) Regulations (Northern Ireland) 2012. The Northern Ireland Scheme is broadly similar to that in force in England and Wales.

There are separate regulations for contracts for work in Scotland applicable to contracts made on or after 1 November 2011.[3] The new Regulations apply only to contracts for work in Scotland entered into on or after this date. For earlier contracts, the Scheme for Construction Contracts (Scotland) Regulations 1998[4] applies. There are new separate regulations for Wales, applicable to contracts for construction operations in Wales entered into on or after 1 October 2011.[5]

A reference to "the Scheme" is to the Principal Regulations for England and Wales, or the Scheme for Scotland, Wales, or Northern Ireland, as the context requires.

Summary

Access to courts in adjudication proceedings – application of ‘pay now argue later’ mantra
A & V Building Solutions Ltd v J & B Hopkins Ltd [2023] EWCA Civ 54 King LJ, Coulson LJ and Popplewell LJ Judgment 27 January 2023

While the courts were open to parties even in an ongoing adjudication, regard must be had to "the guiding principle behind construction adjudication: the ‘pay now argue later’ mantra." Parallel proceedings were not invalid or an abuse of process but part 8 declarations for final determination of issues should be the exception, not the rule and should not be used to circumvent or undermine adjudication. The proper procedure should be followed as set out in the TCC Guidelines. The usual position was that the enforcement proceedings should be heard first, and any Part 8 claim should be dealt with afte the enforcement unless the point raised was straightforward and self-contained, and the parties were agreed that it could be dealt with at the enforcement application without adding to the time estimate.

Attacking an adjudicator's decision on enforcement
J & B Hopkins Ltd v A&V Building Solution Ltd [2023] EWHC 301 (TCC), Mr Roger Ter Haar KC Judgement 15 February 2023
The pre-action protocol for construction and engineering claims did not apply to proceedings to enforce an adjudicator's award. Where a second dispute was not the same as the first dispute and the first adjudicator's award was not claimed to be binding on the second adjudicator, the second adjudicator's contrary findings and award was binding. There was some doubt as to whether the second adjudicator had the power to award payment of a sum found due to the responding party, but the court gave effect to the award.

Fees – Bias – whether adjudicator's demand for security amounted to threat to exercise a lien over the award
Nicholas James Care Homes Ltd v Liberty Homes (Kent) Ltd [2023] EWHC 360 (TCC) Mr Recorder Andrew Singer KC judgment 21 February 2023
"Tenacious and persistent" efforts by the adjudicator's clerk to obtain payment of security for the adjudicator's fees had not "crossed the line”. They did not amount to an attempt to exercise a lien nor constitute a threat to do so. There was no bias.

Natural Justice – challenge to enforcement of award and claim for final determination of validity of final account statement
Atalian Servant AMK Ltd v B W (Electrical Contractors) Ltd [2023] ScotCS CSOH 14 Lord Sandison (16 February 2023)
The adjudicator had not embarked on a frolic of his own. The parties had been allowed and taken the opportunity to address him on the matters of complaint. There was no breach of natural justice. A final account statement was a payment notice and met the provisions of the contract and the Act. The bespoke clause providing that the final account statement was to become final and binding on BW unless adjudication or court proceedings were commenced within 20 days was to be given its natural meaning. Since both adjudication and court proceedings had been commenced within 20 days, the final account statement was not final or binding on BW. The court found it unnecessary to decide whether the second adjudication was a continuation of a first adjudication (in which the adjudicator had resigned) for the purposes of the finality clause. The award was enforced, and an application for payment on the final account statement was deemed irrelevant as it would have undermined the award.

Stay of Execution
WRB (NI) Ltd v Henry Construction Projects Ltd [2023] EWHC 278 (TCC), Pepperrall J. Judgment 10 February 2023
A party who contracted with a newly formed dormant company was not entitled to stay of execution on the grounds that the dormant company would not be able to repay the judgment sum if later called upon to do so. Having resisted the dormant company's proposition that another (active) company was the true contracting party, the paying party had "made its own bed.” Moreover, the delay in giving judgment had afforded the paying party the time to establish the true entitlement had it chosen to do so.

Court decision summaries in full

Click on the options below to read a full summary and analysis.


Access to courts in adjudication proceedings – application of ‘pay now argue’ later mantra

A & V Building Solutions Ltd v J & B Hopkins Ltd [2023] EWCA Civ 54 King LJ, Coulson LJ and Popplewell LJ Judgment 27 January 2023
This was an appeal by AVB from the judgment of Eyre J ("the judge") given on 12 April 2022, granting various declarations in favour of JBH. The appeal raised issues arising out of the parallel jurisdictions of a construction adjudicator, on the one hand, and the courts, on the other. It also raised discrete points about the proper interpretation of the parties' Sub-Contract.

There were two adjudications.
In the first adjudication, AVB sought payment of its interim payment application number 14. JBH took a very limited part. In his decision in January 2021, the adjudicator found that interim payment application 14 was valid and awarded AVB £138,010.86. That sum was never paid.

In December 2021, while the first adjudication was in progress, JBH commenced 'pre-emptive' proceedings for declarations that payment application 14 was invalid because it was sent one day late, that its own subsequent payment notice was valid, and that it had overpaid AVB. The application was heard 12 April 2022, and Eyre J (a) declined to strike out the part 8 application; (b) decided that interim payment application 14 was late and invalid and that the JBH's payment notice was valid. AVB applied for and were granted leave to appeal that decision.

Meanwhile, AVB belatedly commenced enforcement proceedings in March 2022. Because of the delay in the commencement, AVB's enforcement proceedings were not brought on for hearing at the same time as JBH's part 8 proceedings.

After permission to appeal against the judge's order was granted, there was a second adjudication. The second adjudication, on the Final Account, was begun in June 2022 by AVB. The second adjudicator's decision was dated 6 July 2022, in which he concluded, amongst other things, that AVB had failed to prove any entitlement to the Final Account sum they claimed of £455,526.53 and that the true value of the Sub-Contract works was just £289,182.31, which was less than AVB had already been paid. As a result of the decision in the second adjudication, AVB owed JBH the net sum of £82,956.88. Thus, at the time of the appeal, nothing was due to AVB.

AVB did not pay the sum identified by the second adjudicator. The hearing of the enforcement application in respect of the second adjudicator's decision was due to take place after the hearing of the appeal but, for the appellate court's purposes, it was sufficient to note that, on the face of it, the second decision meant that no sums were thereafter due to AVB.

The powers of the court in adjudication
Permission to appeal had been given on three grounds (and refused on others). The first (Ground 1) concerned the substantive and procedural propriety of the part 8 proceedings: was JBH permitted to commence and/or to continue such proceedings, or should they have been struck out? That raised a subsidiary issue: if the part 8 proceedings were valid, how should they have been addressed in the context of an outstanding adjudicator's decision in favour of AVB?

Coulson LJ, giving the judgment of the Court of Appeal, said that while the courts were open to parties in adjudication proceedings, even in an ongoing adjudication[6], regard must be had ton"the guiding principle behind construction adjudication: the ‘pay now argue later’ mantra." That did not mean parallel proceedings were invalid or an abuse of process. However, as the law had developed, resorting to the courts during an ongoing adjudication for declarations of the type sought was the exception, not the rule, and should not be used to circumvent or undermine adjudication[7].

The proper approach to parallel proceedings was as outlined by O'Farrell J in Structure Consulting Limited v Maroush Food Production Limited [2017] EWHC 962 (TCC). The judge should usually give judgment on the claim based on the adjudicator's decision and then – to the extent possible – endeavour to sort out the Part 8 proceedings. The same point was made in Hutton Construction Limited v Wilson Properties (London) Ltd[8], where the judge said that the Part 8 claim should be dealt with after the enforcement unless the point raised was straightforward and self-contained and the parties were agreed that it could be dealt with at the enforcement application without adding to the time estimate. Warnings had been given in subsequent cases, and the proper practice was enshrined in the TCC Guide October 2022 at 9.4.4 and 9.4.5.

Although the duplication of proceedings was a matter of regret, with the part 8 claim relevant only if JBH lost the first adjudication, it was an approach that was open to them. There was nothing in the 1996 Act to suggest otherwise. The judge had been right not to strike out the part 8 application, which disposed of Ground 1 of the appeal. While the judge should have considered the part 8 proceedings through the prism of AVB's successful claim in the first adjudication and the decision of 19 January 2022 in their favour, it was much too late for that to change anything by the time of the appeal.

The rest of the judgment was concerned with the construction of the payment terms of the Sub-contract. The Court of Appeal allowed the appeal, finding notably that interim payment application 14 was not late and was valid; it agreed with the judge that the payment notice was valid; it found there was no waiver or estoppel based on a previous late application; but made no other orders. Although AVB was entitled to enforce the first adjudicator's decision back in April 2022, that entitlement had long been overtaken by events, in particular by the result of the second Final Account adjudication, which result JBH had applied to enforce. Moreover, no part of the appeal sought the payment of any sum by JBH to AVB, so the court had no power to award payment in any event. In the result, this all reflected the fact that the appeal was of a largely academic nature from the outset.

Comment
This case decides nothing new but emphasises the need for the parties (and the court) to follow the TCC Guide when dealing with parallel proceedings, to give precedence to enforcement before part 8 applications, unless the point is short one which can conveniently be dealt with as part of the enforcement. Here neither party honoured the adjudicator's award in its favour. This factor ought to have been at the forefront of the court's consideration of JBH's part 8 application. One possibility (since strike out was not appropriate) would have been to adjourn that application to be heard after the enforcement proceedings, but the court of appeal did not take the opportunity to say so. Further and at first sight, more surprisingly, neither the court below nor the court of appeal stated that the part 8 application could not or should not have proceeded until the first award had been paid (following the ‘pay now argue later’ policy). One can only conclude this leniency was due to the way the parties had behaved with neither honouring the awards made, unexplained late applications to enforce, failure to follow the TCC Guide and their concentration on the construction of the payment provisions.

Attacking an adjudicator's decision on enforcement

J & B Hopkins Ltd v A&V Building Solution Ltd [2023] EWHC 301 (TCC), Mr Roger Ter Haar KC Judgement 15 February 2023
This case followed the unsuccessful appeal of AVB above. It was the hearing of JBH's application to enforce the (second) adjudicator's award in its favour.

JBH was represented by counsel. AVB had no legal representation but appeared by a director/shareholder and a surveyor employee. The Judge decided that the court had power to allow the employee to appear as a 'McKenzie friend'[9] since it was apparent the director (who was entitled to appear) could not fully deploy the arguments relied on by AVB and that it was in the interests of justice to do so.

AVB put forward arguments in three categories.

First that JBH had not followed the applicable pre-action protocol in failing to respond to AVB's letter of claim and therefore, the enforcement proceedings should be struck out. Although it was made late, that was not fatal to the strike our application as JBH's counsel, once aware of it, was able to deal with it. The court dismissed the application since the protocol did not apply to adjudication enforcement proceedings. The letter of claim was, however, useful in summarising AVB's complaints about the adjudicator's award.

The second argument centred on a complaint that the adjudicator had found a sum due to JBH, contrary to the award in the first adjudication, which has been a monetary award in its favour. Although it was doubtless a shock to AVB, who were seeking an increased sum on the final account following a successful adjudication on an interim account, to find a sum awarded against them, not for them, they had not tried to argue that the second adjudicator was bound by the findings and award of the first. Indeed, the final account dispute was a different dispute from the interim payment dispute.

Looking at the jurisprudence, the law was conveniently summarised by Coulson J[10] (as he then was) as follows:
"If the decision was within the Adjudicator's jurisdiction and the Adjudicator broadly acted in accordance with the rules of natural justice, such defendants must pay now and argue later."

Thus, only if the decision was one made without jurisdiction or the decision was made in the presence of material breaches of natural justice would it not be enforced. Neither of those features was contended for in present in this case. The court reminded itself that the principles of enforcement were subject to two narrow exceptions[11], namely (a) admitted error; or (b) a self-contained legal point concerning timing, categorisation, or description of payment notices or payless notices in respect of which the potential paying party had issued Part 8 proceedings. Neither of those two exceptions applied either.

Third, AVB complained of a series of what they said were errors by the adjudicator. The court considered each of the complaints and looked at the way the adjudicator had dealt with them. While in two instances, he might have done better to refer to specific materials, the court found the complaints were unjustified. Moreover, errors of fact, even if proven, would not invalidate the decision.

There was a final matter. Although AVB brought the (second) adjudication, it was AVB who was held to be the party who should make payment. Insofar as the result of the Adjudicator's conclusions was to show that a sum was due or would become due to JBH, that seemed to the court to be a legitimate conclusion. However, "the court had some doubt as to whether it was within [the adjudicator's] jurisdiction to go on to order payment." Nevertheless, the court found it should grant summary judgment since the conclusion that monies were due to JBH was still binding upon AVB, and the court should give effect to it.

Fees – Bias – whether adjudicator's demand for security amounted to threat to exercise a lien over the award

Nicholas James Care Homes Ltd v Liberty Homes (Kent) Ltd [2023] EWHC 360 (TCC) Mr Recorder Andrew Singer KC judgment 21 February 2023

There were three issues before the court.
(1) Should the Decision of the adjudicator (Dr Chern) be enforced summarily (the Decision)?
(2) Should a freezing injunction obtained by the claimant (NJCH) be discharged or continued?
(3) Should there be a stay of execution of enforcement of the Decision of Dr Chern?
NJCH had employed the defendant, Liberty, for construction works at its Beacon Hill care home. There were two adjudications between the parties, the Decision in the second of which was the subject of several applications before the court. The first application in time was an application to enforce the Decision. The second was an application by Liberty to discharge a freezing injunction granted by O'Farrell J. The third was Liberty's application for a stay of execution of any judgment. Liberty also made a part 8 application based on its objections to the enforcement application.

At the heart of Liberty's case was an assertion that 'the way in which Dr Chern demanded payment for his services in advance of the delivery of the Decision' in a series of emails sent by Dr Chern's clerk amounted to the purported exercise of lien for payment before he would issue his Decision. That, it was argued, amounted to manifest bias, and the result was that the Decision was not enforceable.

Pursuant to his terms of appointment, Dr Chern required each party to deposit £10,000 by way of security for his fees. In response, Liberty's solicitors made it clear that Liberty was reserving its position on its jurisdictional arguments (both raised in the adjudication and which might thereafter arise) and that payment would be made without prejudice to that position. NJCH's solicitors confirmed they would not take any point on any jurisdictional challenge relating to payment of the fees. About ten weeks later, after a considerable amount of work had been done, Dr Chern's clerk asked for a further payment by way of security for fees of £15,000 per party. NJCH were slow in paying and asked for more time. Liberty did not pay either. Dr Chern's clerk issued several repeated demands for payment, latterly with a 5pm deadline, finally saying that no further extension would be given and if payment was not made, the matter would be 'taken out of his hands'. NJCH paid and ultimately, it appears so did Liberty, in their case under a further reservation of their position but without objection as to Dr Chern's entitlement. The reason now put forward by Liberty was that to have objected would have been embarrassing and the matter had to be handled sensitively.

In summary, Liberty's submission was that Dr Chern was making demands which amounted to a breach of Paragraph 19 of the Scheme. Although he did not exercise a lien, the (implicit) threat to do so was unlawful and/or contrary to Paragraph 12(a) of the Scheme, there was manifest bias and that Dr Chern's conduct should be rejected and his Decision not enforced.

The court noted what Sir Peter Coulson stated in his textbook Construction Adjudication (4th ed) at para.10.45:
"In adjudication, the courts have indicated firmly that, because of the emphasis on speed in adjudication above all things, the purported exercise of a lien will not be permitted."

The court was referred to previous authority to the effect that an adjudicator could not exercise a lien over his decision pending payment of his fees[12]. It was submitted that it was a moot point as to whether Liberty had ever agreed to be bound by Dr Chern's terms, and indeed they did not entitle him to seek security from the responding party but only the referring party.

In fact, it was not disputed before the court that the effect of the Scheme and the authorities set out above was that an attempt to exercise a lien over the delivery of a decision within the statutory or agreed time periods was unlawful and that such an attempt might well render the decision once delivered unenforceable.

The court noted that while Liberty had objected to paying the fees and had fully reserved its position to avoid the suggestion of waiver of any jurisdictional challenge[13], it had not objected to the fact of, or manner in which the clerk had sought, payment of the fees.

The court analysed the emails and concluded that, despite the fact the demands for payment were "tenacious and persistent," they had not "crossed the line". There was no attempt to exercise a lien nor threat to do so. The Decision was enforceable.

The second issue concerned an allegation by Liberty that NJCH had failed to make full and frank disclosure (as required by previous case law and practice) when obtaining the interim freezing injunction continued by O'Farrell J after an earlier hearing. In the result, they sought the discharge of the injunction. The court found there had not been any deliberate and material non-disclosure.

The third issue. The application for a stay of execution was predicated on the assumption that the freezing injunction would be discharged. Since that application failed, the grounds for the stay fell away.

Comment
We already knew that, at least where the Scheme applies, an adjudicator cannot withhold the decision pending payment of fees. The interest of this case lies in wider questions. It assumes that it is permissible for an adjudicator to seek security for fees, as in this case, whether from the referring party only or from both parties. In this case, the adjudicator's terms of appointment entitled the adjudicator to require security from the referring party, but he sought security from both parties. Could the responding party have refused to give security? And if they had, might it have led to a risk of unconscious bias or the appearance of bias? What would have happened if both parties had refused to give security or further security? The questions did not directly arise and therefore are not addressed. The whole question of security for fees is fraught with danger for the adjudicator and the parties, especially where there are jurisdictional objections. Contractual adjudication can deal with it by its own rules. Statutory adjudication will sooner or later require changes to the Scheme as it seems doubtful that it can or should be dealt with on an incremental basis by the courts.

Natural Justice – challenge to enforcement of award and claim for final determination of validity of final account statement

Atalian Servant AMK Ltd v B W (Electrical Contractors) Ltd [2023] ScotCS CSOH 14 Lord Sandison (16 February 2023)
AMK was subcontractor for works at Lord’s cricket Ground and engaged BW as its electrical subcontractor. Under the bespoke subcontract between AMK and BW, AMK had to provide a statement as to the practical completion of the works. BW then had two months to present its final account and doing so within that period was a condition precedent to any entitlement to payment on that account. AMK then had 28 days to provide a final account statement showing the sum it considered due. If BW did not agree with the sum stated due in final account statement, it had 20 days in which to commence adjudication or court proceedings to challenge the stated sum.

By its final account, BW claimed some £1.8m net. AMK's final account statement showed a net sum due to BW of a mere £2,700.

Within the 20 days, BW commended an adjudication before Mr Entwistle to establish the sum due. Mr Entwistle resigned because of the massive amount of material submitted to him and the short time he was allowed to decide the dispute. BW, again within the 20 days, commenced an action to finally establish the sum due on the final account. Three months later, it commenced a second adjudication before Mr Tony Bingham to determine the sum due on the final account. The court noted that the dispute referred was framed in the widest possible terms.

Mr Bingham awarded BW £1.4m plus interest of £18,000. He found that the AMK final account statement was invalid and of no effect and he revalued the whole of the works on a quantum meruit basis finding that the contract had been converted to what he described as a "beck and call" contract.

BW sought enforcement of Mr Bingham's decision, and AMK opposed on the same on the following grounds.

First, Mr Bingham had not answered the question referred to him, namely "what was the sum due?", but had embarked on a frolic of his own in assessing a fair price based on what he regarded as a new contract. This was not a matter raised by either party, nor had they had the opportunity to address it, and that was a breach of the rules of natural justice.

Second, Mr Bingham had decided that the final account statement was contractually invalid without this issue having been raised by either party, again in breach of the rules of natural justice.

Separately, Mr Bingham had failed to address and thus failed to exhaust his jurisdiction in relation to various lines of defence advanced by AMK, including several items of cross claim. It was suggested that it was not sufficient for Mr Bingham simply to say that he had taken all the submissions into account; he ought to have expressly dealt with the several arguments.

Decision
At paragraph [17], the judgment his Lordship said
"The Court's approach requires to be informed, indeed infused, by the need to promote the aims of the statutory scheme for adjudication, which provides parties to construction contracts with a simple and rapid means of determining their mutual financial rights and obligations, at least on an interim basis. Subject to the minimum legal standards which any power of decision-making must observe, the Court should avoid an approach to the assessment of criticisms of the work of an adjudicator which would tend to complicate and delay such work."

The question put to the adjudicator could scarcely have been wider: what sum (if any) was due from AMK to BW? The subcontract permitted the valuation of additional works on a fair and reasonable basis, and that could, to a greater or lesser degree, be regarded as a quantum meruit. What might be described as inexactitude of the language used did not mean the adjudicator had regarded payment as being governed by a new contract. The term 'beck and call' may have been equally used to describe the changed nature of the works. The parties made it clear to him that neither was suggesting there was a new contract, and any initial attraction there might have been to that view was not persisted in as informing his decision. The view as to a fair valuation might yet prove to be correct. The court was not persuaded that the approach to valuation was a frolic of his own but rather a genuine attempt to answer the question put to him. The objection on that ground failed.

As to the issue of the validity of the final account statement, the adjudicator was clearly entitled under paragraphs 13 and 20 of the Scheme (for Scotland) to raise it with the parties. Once he had done so, there was extensive correspondence in which every opportunity was offered and taken for each party's position to be amply elucidated. In accepting BW's position, he had obviously rejected AMK's position.

On each of the residual complaints, similar observations were made. On a fair reading of the correspondence, each party was given ample opportunity to advance its case. Indeed, if anything, the parties had been overindulged. None of the relevant criticisms were made out.

Decree granted in favour of BW to enforce the decision.

In its action AMK sought declarations that (a) its Final Account Statement was validly issued in terms of clause 33.3 of the subcontract; (b) it was final and binding on BW unless and until the contrary may be determined in the substantive action; and (c) that it was final and binding on Mr Bingham in his adjudication. It finally sought payment of the sum of £1,039,438.14, being the amount brought out by the Final Account Statement.

Issue (a) – was the final account statement validly issued? The short answer was that it met the two requirements of the subcontract. It was issued in time and stated the amount AMK considered to be due on the basis that the final account statement was a payment notice and subject to the provisions of section 110A of the Act. It met those provisions and was, therefore, validly issued.

Issue (b) - was the final account final and binding on BW and therefore, on Mr Bingham? It was noted that the clause in question was in a bespoke subcontract, not a standard form which meant that analysis of conclusivity in the context of standard forms did not assist. Second, it was only binding on BW and not on AMK – indeed, AMK had sought a different sum in the Bingham adjudication than had been claimed under the final account statement. The clause said nothing about being evidentially conclusive. The only requirement was that either adjudication or court proceedings were issued within 20 days. BW had done both. Upon the first being done (the commencement of the Entwistle adjudication), the final account statement lost the capacity to become final and binding on BW. That was the natural construction of the clause. As to whether one set of proceedings could be considered to be a continuation of another (i.e., the Bingham adjudication considered to be a continuation of the Entwistle adjudication), there was no clear answer, and it was unnecessary to decide the point.

The final matter was whether the court should address the claim for payment by AMK. To grant the declaration for payment would be to undermine the award in favour of BW. While the claim was not incompetent, in that the court ought to consider it, it was ruled to be 'irrelevant', meaning the relief claimed by AMK would not be granted.

Comment
It is interesting to note the interaction between adjudication enforcement and proceedings for the final determination of issues arising on enforcement in Scottish courts. As we know, in England, the practice is that the two are heard together, provided doing so will not add to the time allowed for the enforcement proceedings and there is no need for any additional evidence or extensive argument. In Scotland, the position is somewhat different. In Scotland, it has been decided[14] that such a challenge could proceed if it was ripe for decision and could result in final determination of the dispute. In this case, the court did consider the claims for declaration by AMC, which were granted in part but not so as to undermine the right to payment awarded in the Bingham adjudication; and without prejudging the final determination by the court of the true value of the final account in the proceedings yet to be heard.

Stay of Execution

WRB (NI) Ltd v Henry Construction Projects Ltd [2023] EWHC 278 (TCC), Pepperrall J. Judgment 10 February 2023)
WRB sought to enforce an adjudicator’s award in its favour for the sum awarded plus interest, together with VAT where applicable, and administrative charges and legal costs on the adjudicator's fees ordered to be reimbursed to WRB by HCP but which were only paid after the adjudicator had sued both parties to obtain payment and which had been met by WRB.

There were several oddities about the case. First and foremost, WRB was a dormant company and it claimed the true party to the subcontract giving rise to the dispute with HCP was made with WRB Energy Limited. WRB asserted that the subcontract was with WRB Energy Ltd. That issue had been resolved for the time being in the adjudication, where it was decided that WRB was the contracting party entitled to the payment.

Next, the amount claimed was less by some £100 than the payment awarded by the adjudicator due to an arithmetical error by WRB. Further, WRB had indicated before the application that it would not pursue payment of the VAT, yet it now sought summary judgment for the 'applicable VAT'. Finally, it had not included a claim for the adjudicator's charges and costs in its application but still asked the court to give judgment for that item.

The court gave judgment for the sum claimed in the summary judgment application (corrected for the arithmetical error) and no more; no VAT as it was not clear that a dormant company was registered for and liable to pay VAT; and no adjudicator's charges and costs as these had not been claimed in the original claim or application.

HCP asserted it had a substantial counterclaim and set off having overpaid WRB and now sought a stay for a short period to enable it to adjudicate its cross claims. It relied on the case of Wimbledon[15] grounds, namely that WRB was impecunious and would be unable to repay the judgment sum if HCP succeeded on its cross claims.

The judge quoted the principles paid out by HHJ Coulson QC (as he then was) in Wimbledon:
"(a) Adjudication … is designed to be a quick and inexpensive method of arriving at a temporary result in a construction dispute.
(b) In consequence, adjudicators' decisions are intended to be enforced summarily and the claimant (being the successful party in the adjudication) should not generally be kept out of its money.
(c) In an application to stay the execution of summary judgment arising out of an adjudicator's decision, the court must exercise its discretion with considerations a) and b) firmly in mind (see AWG Construction Services v. Rockingham Motor Speedway [2004] EWHC 888 (TCC)).
(d) The probable inability of the claimant to repay the judgment sum (awarded by the adjudicator and enforced by way of summary judgment) at the end of the substantive trial or arbitration hearing may constitute special circumstances rendering it appropriate to grant a stay (see Herschell Engineering Ltd v. Breen Property Ltd (unreported) 28 July 2000, TCC).
(e) If the claimant is in insolvent liquidation, or there is no dispute on the evidence that the claimant is insolvent, then a stay of execution will usually be granted (see Bouygues (UK) Ltd v. Dahl-Jensen (UK) Ltd (2000) 73 Con LR 135, [2001] 1 All ER (Comm) 1041, CA and Rainford House Ltd v. Cadogan Ltd [2001] BLR 416).
(f) Even if the evidence of the claimant's present financial position suggested that it is probable that it would be unable to repay the judgment sum when it fell due, that would not usually justify the grant of a stay if:
(i) the claimant's financial position is the same or similar to its financial position at the time that the relevant contract was made (see Herschell); or
(ii) the claimant's financial position is due, either wholly, or in significant part, to the defendant's failure to pay those sums which were awarded by the adjudicator (see Absolute Rentals v. Glencor Enterprises Ltd [2000] CILL 1637)."
The court also referred to the remarkably similar case of Westshield Civil Engineering Limited v. Buckingham Group Contracting Limited[16], in which Akenhead J refused a stay. There as here, the claimant had been a dormant company both at the time of the subcontract and enforcement proceedings and had itself contended that the true contracting party was a different and solvent company. The parties were, however, bound by an earlier adjudication decision that the claimant was the true subcontractor. In Westshield, the associated company that claimed to be the true sub-contractor offered to guarantee the repayment of the judgment sum in the event that it was later determined that it was the true contracting party.

WRB Energy Ltd offered to guarantee payment here if the court was otherwise minded to grant a stay.

While finding it was probable that WRB would be unable to repay the judgment sum, the court refused to grant a stay. On its own case, HCL chose to place the subcontract with a newly formed dormant company. The risk it now complained of was "the result for which it contracted". It would be unfair and contrary to the spirit of adjudication to allow HCL to escape its liability on the basis of WRB's unchanged financial position. Also, it was HCL who had resisted the argument that the true subcontractor was WRB and thus had "made its own bed." Finally, the judgment had been unavoidably delayed, giving HCL ample opportunity to establish its alleged entitlement upon its cross claims.

Comment
There is little new in this case on the question of stay and given the ‘pay now argue later’ mantra, the outcome was inevitable. It does, however, act as a reminder that VAT is not awarded automatically and that a claimant must at least show it is registered for and liable to charge VAT. The comment that the delay in giving judgment had allowed HCL time to establish its alleged entitlement is, however, curious; since if HCL expected to obtain a stay, it would presumably not have paid the judgment; and its entitlement to start another adjudication before making payment would have been contrary to the law and practice exemplified in S&T v Grove[17].

About the author: Kenneth Salmon MCIArb is a qualified solicitor in England, Wales and Eire. He is a Ciarb qualified and CMC accredited Mediator and Chair of Education at Ciarb North West Branch. Kenneth is a construction specialist currently working as a consultant to Slater Heelis Limited. He has extensive experience of all forms of dispute resolution including arbitration, adjudication, expert determination and mediation He is the author of Cases on the Enforcement of Construction Adjudication Awards (2012) and the series Cases (on adjudication enforcement) published in Ciarb’s journal Arbitration: The International Journal of Arbitration, Mediation and Dispute Management 1999-2017.


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Footnotes
[1] Scheme for Construction Contracts (England & Wales) Regulations 1998 (SI 1998/649).
[2] Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011 (SI 2011/2333).
[3] Scheme for Construction Contracts (Scotland) Amendment Regulations 2011 (SI 2011/371).
[4] Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998/687) (S.34).
[5] Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations 2011 (SI 2011/1715) (W.194).
[6] See, e.g., Jarvis Facilities Limited v Alston Signalling Ltd [2004] EWHC 1285 (TCC); Walter Lilly & Co. Ltd v DMW Developments Ltd [2008] EWHC 3139 (TCC); and Dalkia Energy & Technical Services Ltd v Bell Group UK Ltd [2009] EWHC 73 (TCC); 122 Con LR 66.
[7] See WW Gear Construction Ltd v McGee Ltd [2012] EWHC 1509 (TCC);[2012] BLR 255; and Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd [2017] EWHC 15 (TCC).
[8] [2017] EWHC 517 (TCC); [2017] BLR 344.
[9] Following the helpful guidance in the judgment of Hildyard J. in Bank St Petersburg v Arkhangelsky (No. 2)[1] at paragraphs [73] to [76]
[10] Hutton Construction Limited v Wilson Properties (London) Limited [2017] BLR 344 at [14]
[11] Identified in Hutton v Wilson [2017] BLR 344.
[12] Mott MacDonald Ltd v. London & Regional Properties Ltd [2007] EWHC 1055 (TCC).
[13] Platform Interior Solutions v. ISG Construction [2020] EWHC 945 (TCC) at paras.49-50; Cubitt Building & Interiors Ltd v. Fleetglade Ltd [2006] EWHC 3413 (TCC).
[14] D McLaughlin & Sons v East Ayrshire Council [2020] CSOH 109; 2021 SLT 1427.
[15] Wimbledon Construction Company 2000 Ltd v. Vago [2005] EWHC 1086 (TCC), (2005) 101 Con LR 99.
[16] [2013] EWHC 1825 (TCC), 150 ConLR 225.
[17] [2019] EWCA Civ 2448.