Citation: [2023] EWHC 278 (TCC)
Abstract
The court found that the claimant sub-contractor was entitled to enforce an adjudication award in its favour and that the defendant main contractor was not entitled to a stay of execution of enforcement in order to establish its alleged cross-claim or because of the risk of it not being able to recover damages from the sub-contractor which was a dormant company.
Summary of Facts
The claimant was a sub-contractor undertaking mechanical, electrical, and public health systems at a development in London. The defendant was the main contractor. The claimant sought summary judgment on sums associated with an adjudicator’s decision, which included sums additional to that awarded by the adjudicator (which concerned valuation of works). The judge considered there to be problems with the VAT element of the sum sought by the claimant because it could not be established that the claimant was VAT registered. At the hearing the claimant withdrew its claim for VAT.
The defendant made a cross application seeking a stay of execution of the summary judgment sum. Whilst accepting that the ‘existence’ of a possible cross-claim did not provide a defence to enforcement, the defendant applied on the basis that it had a cross-claim of around £750,000—but said that it needed a ‘short’ stay in order to establish its cross-claim. It also said that because the defendant was a dormant company it was highly probable that any monies paid to it now, would not be repaid in the event the defendant’s future cross-claim was successful.
The claimant argued that even a short stay would undermine the statutory purpose of adjudication. Further, in the event the court was minded to order a stay, another company associated with the claimant (WRB Energy Ltd) offered to guarantee the repayment of any part of the judgment sum in the event that the defendant obtained a valid order, decision or judgment in its favour for payment within three months of the defendant’s own payment.
Held – Pepperall J
The court gave summary judgment for the sum of £140,000 having noted issues (principally with VAT) with the calculation of the sum originally sought (£173,000). It refused to order a stay whilst recognising that this was a case where it was probable that the claimant would be unable to pay a future judgment sum in respect of the defendant’s alleged cross-claim. However, the court decided that it was appropriate to enforce the adjudicator’s decision and not to require a guarantee by WRB Energy Ltd, and noted three points in its judgment.
Firstly, in respect of the contracting parties, the defendant had placed its sub-contract with a newly formed dormant company. The risk it now complained of was the ‘inevitable consequence’ of having placed the sub-contract with a dormant company and ‘the result for which it contracted.’ As such, it would be unfair and contrary to the spirit of the adjudication regime to allow the defendant to escape its liability to meet an adjudication award on the basis of the claimant’s essentially unchanged financial position.
The judgment noted the considerable parallels with Westshield v Buckingham Group. In that case the claimant had also been a dormant company both at the time of the sub-contract 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 sub-contractor. In the same case, 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. Mr Justice Akenhead refused a stay in that case.
Secondly, the defendant had previously resisted the argument that the sub-contract had not been placed with the claimant. Accordingly, the defendant had essentially ‘made its own bed’.
Thirdly, the handing down of judgment had been delayed owing to a substantial TCC case and, given that delay, the defendant would have had ‘ample opportunity’ to establish its alleged cross-claim.
James Frampton acted for the Claimant. A copy of the judgment is available here.
