Building contract – Adjudication award – Defendant main contractor subcontracting drainage work to second claimant company – Contract naming first claimant as sub-contractor – Parties referring dispute to adjudication – Adjudicator making award in favour of claimants – Defendant instituting new proceedings seeking recovery of alleged overpayments to claimants – Whether adjudication decision enforceable – Whether defendant’s proceedings preventing adjudicator’s decision from becoming final and binding – Claim allowed
The defendant company was a main contractor on the construction of a new studio for the television soap opera Coronation Street in Salford. The defendant asked the second claimant company to quote for the supply and installation of drainage works. Discussions between those parties resulted in a sub-contract for those works; that document named the sub-contractor as the first claimant, a dormant company owned by some of the same shareholders as the second claimant.
After the sub-contract works were completed, a dispute arose as to the proper valuation of the final account. The defendant sought an adjudication in accordance with the procedure set out in the sub-contract, seeking a declaration that the sum due to the first claimant was £363,766.81 plus VAT.
The adjudicator decided that the sub-contract had been made with the first claimant rather than the second claimant. He made an award in favour of the first claimant in the sum of £505,474.66, plus VAT. When the defendant failed to pay the net sum due, the first claimant instituted a second adjudication against it. By then, unknown to the claimants, the defendant had commenced proceedings in the Technology and Construction Court in Manchester seeking to recover alleged overpayments under the sub-contract. However, it had not served its particulars of claim by the time the claimants issued their own proceedings to enforce the adjudicator’s decision in their favour.
The principal issue in the enforcement proceedings was whether the proceedings commenced by the defendant prevented the adjudicator’s decision from becoming final and binding. A further issue arose as to whether, even if the decision were considered binding until final resolution of the dispute, there should be a stay of execution given that the successful party was a dormant company.
Held: The claim was allowed.
(1) CPR 7 imposed no absolute requirement that particulars of claim be embodied within the claim form. By CPR 7.4(1), the claimant could either incorporate them within the claim form or serve them with it. The rules distinguished between the issue of proceedings and the service of proceedings. Proceedings in England and Wales were started when they were issued by the court; the issue was, at least usually, signified by the impressing of the court stamp with a date and usually followed the payment of the requisite fee.
Adjudication generally, and under the present sub-contract, was a process primarily designed to provide a decision that was temporarily binding after a relatively summary procedure but could be reversed in the tribunal selected by the parties for final dispute resolution. Clear wording would be required to take away the right of a party to refer the dispute to that final tribunal. Although the parties to the sub-contract had provided for that right to be taken away, it was subject to a step being taken, namely commencement of proceedings within a time limit, which would have the effect of preventing the decision from becoming finally binding. In the absence of absolutely clear and express wording to that effect, the “commencement” of proceedings did not mean “service”. Accordingly, the adjudicator’s decision had not become final and binding where the defendant had commenced proceedings essentially referring the dispute addressed by the adjudicator through court procedures for final resolution.
(2) This was not an appropriate case for a stay of execution. The defendant had properly accepted that the adjudicator’s decision was binding as between it and the first claimant. Although the decision did not, as such, order payment of the net outstanding sum to the first claimant, it had become due because the sub-contract required the parties to comply with the decision until the dispute had been finally determined. A stay would not usually be granted if the claimant’s financial position were the same or similar to its financial position at the time when the relevant contract was made, as was the case here. In any event, the second claimant had agreed to guarantee, in effect, the return by the first claimant of any net overpayment by the defendant in relation to any sums ordered to be paid following the present judgment: Wimbledon Construction Co 2000 Ltd v Derek Vago [2005] BLR 374 considered.
Vincent Moran QC (instructed by Pannone LLP) appeared for the claimants; Serena Cheng (instructed by Trowers & Hamlin LLP) appeared for the defendant.
Eileen O’Grady, barrister
