Adjudication – Summary judgment – Stay of execution – Costs – Claimant seeking summary judgment to enforce adjudicator’s award in its favour against defendant – Defendant applying for stay of execution of judgment pending further adjudication – Whether special circumstances rendering enforcement of judgment inexpedient – Whether claimant entitled to costs on indemnity basis – Application dismissed
The claimant was a wholly owned subsidiary of Tarmac Holdings Ltd (T), which was itself owned by CRH plc. An adjudicator made a decision in its favour against the defendant local authority in the sum of £3,316,487.55. The claim arose out of civil engineering and construction work carried out by the claimant to the defendant’s order on the A48 between Swansea and Carmarthen. The claimant applied for summary judgment in order to enforce the adjudicator’s decision.
The defendant did not accept that the adjudication decision reflected the true state of the parties’ account. Accordingly, it indicated that it intended to refer the issue of the true value of the works to adjudication. While the defendant accepted that the claimant was entitled to summary judgment, it applied for a stay of execution pending the outcome of such further adjudication on the grounds that the claimant was insolvent and its parent company’s guarantee was inadequate to safeguard the defendant’s position.
Held: The application was dismissed.
(1) CPR rule 83.7(4)(a) provided that the court might stay the execution of a judgment or order if there were “special circumstances which render it inexpedient to enforce the judgment or order”. Adjudication was designed to be a quick and inexpensive method of arriving at a temporary result in a construction dispute. Consequently, adjudicators’ decisions were intended to be enforced summarily and the successful party should not generally be kept out of its money. In an application to stay the execution of summary judgment arising out of an adjudicator’s decision, the court had to exercise its discretion with those considerations in mind: AWG Construction Services v Rockingham Motor Speedway [2004] EWHC 888 (TCC) and Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC 1086 (TCC); (2005) 101 Con LR 99 considered.
The probable inability of the claimant to repay the judgment sum at the end of the substantive trial, or arbitration hearing, might constitute special circumstances rendering it appropriate to grant a stay. If the claimant was in insolvent liquidation, or there was no dispute on the evidence that the claimant was insolvent, then a stay of execution would usually be granted. Even if the evidence of the claimant’s present financial position suggested that it was 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 was the same or similar to its financial position at the time that the relevant contract was made; or (ii) 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.
(2) It was common ground that in cases in which the court might otherwise grant an application for a stay based on concerns as to the claimant’s solvency, such application might be defeated by offering a bond or guarantee which provided sufficient security: FG Skerritt Ltd v Caledonian Building Systems Ltd [2013] EWHC 1898 (TCC) considered.
Recognising that the claimant’s company accounts gave rise to legitimate concerns as to its solvency and, in particular, whether the claimant would be able to repay the judgment sum in the event that the defendant succeeded in its true-value adjudication, it sensibly offered a parent-company guarantee from T.
On the evidence, T was plainly balance-sheet solvent. Since T was not a trading company, it did not hold cash and had net current liabilities. The existence of net current liabilities did not of itself mean that a company could not pay its debts as they fell due. T’s cash position was driven by the cash-pooling arrangements operated by the group of companies.
In any event, the ultimate parent company had a very substantial positive cash position and there was no evidence that it would not continue to support T’s own cash position. Accordingly, the guarantee offered by T more than protected the defendant’s position and there were no proper grounds for staying the enforcement of the judgment.
(3) It was common ground that the claimant was entitled to its costs of the enforcement but it sought an order for indemnity costs because of the defendant’s alleged unreasonable and obstructive behaviour.
An award of indemnity costs under CPR rules 44.2(4)-(5) was appropriate only where the conduct of a paying party was unreasonable to a high degree. The court had to decide whether there was something in the conduct of the action, or the circumstances of the case in general, which took it out of the norm and justified an order for indemnity costs. The pursuit of a weak claim would not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. But the pursuit of a hopeless claim might well lead to such an order. If a claimant cast its claim disproportionately wide, and required the defendant to meet such a claim, there was no injustice in denying the claimant the benefit of an assessment on a proportionate basis given that the claimant had forfeited its rights to the benefit of the doubt on reasonableness: Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd [2012] EWHC 1643 (TCC); [2013] PLSCS 130; [2013] 4 All ER 765 followed.
(4) In this case, the defendant had not defended the enforcement claim and had not resisted the entry of judgment. There were, accordingly, no grounds for ordering it to pay indemnity costs of the claim itself. However, there was no merit in its application to stay judgment. Further, it was unreasonable to a high degree to promise payment if it was provided with a VAT invoice and correct calculation, only then to raise spurious objections to the guarantee provided.
Accordingly, the defendant would be ordered to pay the costs of the proceedings to be assessed on the standard basis save that the costs of the defendant’s application for a stay would be assessed on the indemnity basis.
Peter Brogden (instructed by Brodies LLP) appeared for the claimant; Mischa Balen (instructed by Geldards LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Alun Griffiths (Contractors) Ltd v Carmarthenshire County Council
