Citation: [2023] EWHC 2269 (TCC)
Abstract
The Court refused an employer’s application to stay the enforcement of an adjudicator’s decision pending a true valuation of the works. In doing so, a guarantee provided by the holding company of the contractor was considered sufficient to protect the employer’s position in the event that the true value adjudication resulted in monies having to be repaid to the employer. This was because there was no evidence that the ultimate parent company would not support the holding company if it experienced cash flow issues.
Factual background
The claimant contractor, Alun, carried out civil engineering and construction works for the defendant Council on the A48 (Swansea to Carmarthen). Alun sought to enforce an adjudicator’s decision in its favour in the sum of £3,316,487.55 by summary judgment. The Council disputed the adjudicator’s value of the works and sought to refer the issue to a true value adjudication. It therefore applied for a stay on enforcement, which was the subject of this case. The Council argued that Alun was cash-flow insolvent and that the holding company’s guarantee was inadequate to protect its position: [19].
Ratio
The court affirmed the principles set out by HHJ Coulson (as he then was) in Wimbledon Construction Company 2000 Ltd v. Vago [2005] EWHC 1086 (TCC), (2005) 101 Con LR 99. There was, however, no evidence in this case that the claimant’s financial position was the same or similar to its financial position at the time that the relevant contract was made, or that the claimant’s financial position was due, either wholly, or in significant part, to the defendant’s failure to pay the sums awarded by the adjudicator.
Nevertheless, on the basis of the guarantee that had been provided, the court found that there was “no merit whatever” in the Defendant’s application to stay judgment. The guarantor was balance-sheet solvent with a net asset position of £1.5 billion (against a judgment debt of £3.3 million). The judge accepted that the guarantor did not hold cash and had net current liabilities, but held that net current liabilities do not of themselves mean that the guarantor was unable to pay its debts as they fell due. The ultimate parent company had a substantial positive cash position and there was no evidence that it would not continue to support the guarantor’s own cash position. It was fanciful to suggest that the group would not support the cash requirements of the guarantor and it was “neither commercially realistic nor correct in law” to assume that the guarantor would divest its assets to another group company at an undervalue to avoid its liabilities.
Having decided that there was “no merit whatever” in the Defendant’s application, and noting that the Defendant had at one stage promised to pay before raising spurious objections, the court decided that the council’s conduct “was unreasonable to a high degree” and ordered indemnity costs on the stay application.
Peter Brogden acted for the Claimant. A copy of the judgment is available here.
