Building contract – Adjudication – Enforcement – Claimant applying for summary judgment to enforce adjudicator’s award – Whether claimant as company in liquidation entitled to summary judgment – Application dismissed
B Ltd was engaged by the Olympic Development Authority as a management contractor to perform certain construction works for the Olympic Park and other works necessary for London to hold the 2012 Olympic Games. B Ltd required a trade contractor to perform the necessary hard landscaping works for the northern part of the Olympic Park. The defendant was pre-qualified to tender for such works; the claimant was not. The trade contract was to include all supervision and resources necessary to perform the works. The defendant entered into the subcontract with B Ltd and the works commenced. The contract included an adjudication clause.
It was common ground that the claimant performed a substantial amount of the work before it went into liquidation. The liquidators failed to agree with the defendant the amount of payment outstanding to the claimant on the final account and obtained information under section 236 of the Insolvency Act 1986 about the final account between B Ltd and the defendant. They then concluded that there was a valid claim against the defendant with a reasonable prospect of success.
Accordingly, the claimant commenced adjudication against the defendant for approximately £4 million. The adjudicator awarded the claimant approximately £1.2 million. The claimant then applied under CPR part 7 for summary judgment to enforce the adjudicator’s decision.
Issues arose as to the circumstances in which a company in liquidation was entitled to summary judgment on a valid adjudicator’s decision in its favour; whether those circumstances were present such that the claimant was entitled to summary judgment; and if so, whether the court order should a stay of execution in light of the Supreme Court decision in Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25; [2020] PLSCS 117.
Held: The application was dismissed.
(1) The five principles to be applied by the court when considering an application for summary judgment on an adjudication decision in favour of a company in liquidation were: (i) whether the dispute in respect of which the adjudicator had issued a decision was one in respect of the whole of the parties’ financial dealings under the construction contract in question, or simply one element of it; (ii) whether there were mutual dealings between the parties that were outside the construction contract under which the adjudicator had resolved the particular dispute; (iii) whether there were other defences available to the defendant that were not deployed in the adjudication; (iv) whether the liquidator was prepared to offer appropriate undertakings, such as ringfencing the enforcement proceeds, and/or where there was other security available; and (v) whether there was a real risk that the summary enforcement of an adjudication decision would deprive the paying party of security for its cross-claim: Bresco applied.
The principle at (i) was necessary as the courts had some experience of parties referring a very small, or tightly defined, dispute to adjudication for tactical reasons, leaving other disputes under the construction contract outwith that adjudication. Although that might be beneficial to that party in some circumstances, if the referring party was in liquidation, it would not assist that party on enforcement. Whether the original intention of the legislators or not, the type of overly-technical dispute concerned with services of notices within particular number of days that were called “smash and grab” adjudications would rarely if ever be susceptible to enforcement by way of summary judgment by a company in liquidation.
(2) It was in the public interest that liquidators should be able to pursue and enforce debts owed to companies in liquidation in a cost-effective manner. There were also a variety of different methods and models available for them to do so. Simply because one party to a construction contract was in liquidation did not entitle the other party to that contract to a windfall. The Supreme Court in Bresco had made it clear that a company in liquidation had the right to adjudicate its disputes under a construction contract. The decision also made it clear that the undoubted difficulties that were present in terms of enforcement in favour of companies in liquidation, and potential repayment to the paying party, were matters to be considered when summary judgment was sought, if that occurred.
The claimant was not entitled to an order from the court that the defendant pay the claimant the sum the subject of the decision. As there remained a real risk that summary enforcement of the adjudication decision would deprive the defendant of its right to have recourse to the company’s claim as security for its cross-claim, the court would refuse summary judgment.
(3) If that was wrong and summary judgment were to be granted to the claimant, the defendant would be entitled to a stay of execution in any event. The usual outcome where a claimant was in insolvent liquidation, or where there was no dispute on the evidence that the claimant was insolvent, was that a stay of execution would usually be granted. That was the case here. On the facts of this case, a stay of execution would be ordered, even if the claimant were otherwise to be entitled to summary judgment. Accordingly, the application for summary judgment failed: Wimbledon Construction Company 2000 Ltd v Vago [2005] BLR 374 considered.
(4) (per curiam) The court had developed a streamlined and rapid procedure in adjudication business for abridging time for acknowledgement of service, serving evidence and the other steps necessary. However, that procedure was not suitable for summary judgment applications such as the present. In proceedings brought by a company in liquidation concerning a historic dispute, the normal time scales in the Civil Procedure Rules for acknowledgment of service and the other steps necessary for applications for summary judgment to be heard were likely to be more appropriate, with little justification for expedition. That would lead to hearings taking place within a number of months, rather than within a few weeks of issuing the claim form, but would enable a defendant to meet the claim for summary judgment fairly; and preserve the fast track process for those solvent parties who were in urgent need of a court decision on a more contemporaneous or pressing dispute. Parties in a position similar to the claimant should not expect their claims for summary judgment to be routinely expedited in the same way as more conventional adjudication business.
Helena White (instructed by Pinsent Masons LLP) appeared for the claimant; Riaz Hussain QC (instructed by DLA Piper UK LLP) appeared for the defendant.
Eileen O’Grady, barrister
