PBS Energo AS v Bester Generacion UK Ltd

Building contract – Adjudication – Enforcement – Appellant sub-contractor seeking to enforce adjudicator’s award – Appellant applying for summary judgment – Respondent resisting claim on ground that it had reasonably arguable case of fraud – Judge refusing to enforce adjudicator’s decision because respondent could properly argue that adjudicator’s decision procured by fraud – Appellant appealing – Whether appellant entitled to enforcement – Whether service of defence condition precedent to ability to raise allegations of fraud – Appeal dismissed By a main contract dated 29 April 2016, the respondent was engaged to design and build a biomass-fired energy-generating plant in Wrexham. The following month, the respondent engaged the appellant to act as sub-contractor in respect of the engineering, procurement, construction and commissioning of the plant. The sub-contract price was £14,230,000 plus VAT. Within a year, the respondent and appellant had fallen out and the appellant proposed to terminate the sub-contract. Consequently, the employer called on the performance security provided by the respondent under the main contract, which then triggered similar guarantees provided by the appellant under the sub-contract in the sum of £2.7m. Eventually, the main contract was terminated. As regards the contract between the appellant and the respondent, there were two adjudications: in the first adjudication, the adjudicator found that the appellant had been entitled to terminate the sub-contract between it and the respondent; in the second adjudication, the appellant sought to quantify and recover the losses arising from the termination in the sum of £1.7m, with interest. The appellant appealed against the decision of Pepperall J in which he dismissed the appellant’s claim for summary judgment in its claim to enforce the adjudicator’s decision. The judge refused to enforce the adjudicator’s decision because he found that the respondent could properly argue that that decision had been procured by fraud: [2019] EWHC 996 (TCC). The appellant appealed contending, amongst other things, that the judge should have found that, because the respondent had not filed a defence alleging fraud, the allegations of fraud were not open to the respondent. Held: The appeal was dismissed. (1) To support the proper operation of the Housing Grants (Construction and Regeneration) Act 1996, the Technology and Construction Court (TCC) had created its own speedy adjudication enforcement procedure. A claimant seeking to enforce the decision of an adjudicator could make an application for summary judgment at the same time as serving the claim form. The claim form had to be accompanied by an application notice setting out the procedural directions that were sought. Commonly, the claimant’s application would seek an abridgement of time for the various procedural steps, and summary judgment under CPR rule 24. The claim form and the application should be accompanied by a witness statement or statements setting out the evidence relied on in support of both the adjudication enforcement claim and the associated procedural application. Further, pleadings in the adjudication might be required where questions of the adjudicator’s jurisdiction were being raised. CPR rule 24.4(2) provided that, where there was an application for summary judgment, no pleaded defence was necessary. On the face of it, that appeared to be a complete answer to the suggestion that a defendant in adjudication enforcement proceedings was required to plead a defence alleging fraud before those allegations could be considered at the summary judgment/enforcement hearing. (2) Although a defendant seeking to resist the summary enforcement of an adjudicator’s decision by raising an allegation of fraud might be well advised to plead a defence, the pleading and service of such a defence was not a condition precedent which had to be fulfilled before the defendant could rely on such an allegation. A claimant who used the accelerated procedure did so because it wished to enforce the adjudicator’s decision as swiftly as possible. It was a procedure which was expressly designed to assist claimants such as the appellant. But claimants were not obliged to use that procedure: that remained a matter of choice. There would always be a residual risk to any claimant seeking to use the accelerated procedure that something might arise on enforcement which had not arisen in the adjudication. The only way to eliminate that risk was to wait until the defendant had pleaded a defence and then seek summary judgment. The appellant had decided not to wait. (3) The accelerated procedure was plainly not intended to qualify or modify rule 24(2) and did not purport to do so: it presupposed that the procedural step of serving and filing of a defence would not take place before the hearing of the summary judgment application. The accelerated procedure was therefore entirely consistent with the CPR. It would be illogical if adjudication enforcement, where speed was of the essence, mandated an additional procedural step which the CPR generally did not require. Therefore, in accordance with rule 24(2), there was no requirement for the respondent to provide a pleaded defence prior to the hearing of the summary judgment application. Further, there was no mandatory requirement for the respondent to plead the allegations of fraud upon which they relied to resist enforcement: SG South Ltd v Kingshead Cirencester LLP [2009] EWHC 2645; [2010] BLR 47; Speymill v Baskind [2010] EWCA Civ 120; [2010] PLSCS 62 and Gosvenor London Ltd v Aygun Aluminium UK Ltd [2018] EWHC 227 (TCC); [2018] BLR 353 considered. (4) In any event, that conclusion did not prejudice the appellant in the present case or claimants generally. There was no suggestion that either the parties or the judge were in any doubt as to the complaints being made. In addition, in so far as the requirement to plead fraud provided an important general safeguard, the same was true for allegations of fraud made in a witness statement or in the submissions of counsel in open court. Although a defendant to an adjudication enforcement claim might be well advised to provide a pleaded defence setting out any allegations of fraud, there was no mandatory requirement that the defendant do so if the claimant was seeking summary judgment. CPR rule 24.4(2) provided to the contrary. Moreover, where substantial allegations of fraud were found to be arguable, the right course would usually be to refuse summary judgment. In such a case, no question of a stay of execution arose. Timothy Sampson and Ryan Turner (instructed by Keystone Law) appeared for the appellant; Steven Walker QC and Tom Owen (instructed by Watson Farley & Williams LLP) appeared for the respondent. Eileen O’Grady, barrister Click here to read a transcript of PBS Energo AS v Bester Generacion UK Ltd