When will the court stay enforcement of an adjudicator’s decision?  

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Authored by: Stanley Lo

In WRB (N.I.) Ltd v Henry Construction Projects Ltd [2023] EWHC 278 (TCC), the Claimant sought summary judgment to enforce an adjudicator’s decision in its favour, while the Defendant sought a stay of execution of enforcement.  The judgment usefully sets out the legal principles applicable to such stay applications. In this case, the court refused to grant a stay.  

Background

The action concerned a dispute arising out of a construction project in relation to which Henry Construction Projects Ltd (HCPL) was the main contractor. HCPL engaged WRB (N.I.) Ltd (WRB) to design, supply, install, test and commission the mechanical, electrical and public health systems for the project for a total of £2.18 million plus VAT.  The unusual feature in this case was that WRB was a dormant company prior to the Sub-Contract and remained such. WRB in a previous adjudication disputed that it was a party to the Sub-Contract, arguing that the true sub-contractor under the Sub-Contract was WRB Energy Ltd, while HCPL contended that it had contracted with WRB. The previous adjudicator ruled that WRB was the true sub-contractor. 

Adjudication                                                            

WRB served a notice of adjudication in respect of the value of an interim payment application and the adjudicator decided that the true balance owed to WRB was £120,655.35 plus interest of £96.79 to 13 May 2022. The adjudicator directed HCPL to pay £120,752.14 including the interest payable to 13 May 2022 and thereafter interest until payment at the daily rate of 99p.  HCPL made no payments pursuant to the adjudicator’s decision.  WRB subsequently applied to court for summary judgment to enforce the adjudicator’s decision. HCPL applied to stay enforcement pending adjudication of its asserted cross claims. It also argued that WRB’s parlous financial standing meant that it was highly probable that any monies paid now would not be repaid in the event that HCPL should succeed in its own claim.

Legal Principles

The court referred to the legal principles applicable to applications to stay enforcement of adjudicator decisions, as follows:

• UK’s Civil Procedure Rules provide that the court may stay the execution of a judgment or order if there are "special circumstances which render it inexpedient to enforce the judgment or order.”
  
  
• The relevant legal authorities provide that:

• Adjudication is designed to be a quick and inexpensive method of arriving at a temporary result in a construction dispute.


• Consequently, adjudicators’ decisions are intended to be enforced summarily and the claimant (being the successful party in the adjudication) 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 must exercise its discretion with the above considerations firmly in mind.
  
  
• The probable inability of the claimant to repay the judgment sum (awarded by the adjudicator and enforced by way of summary judgment) at the end of the substantive trial, or arbitration hearing, may constitute special circumstances rendering it appropriate to grant a stay.


• If the claimant is in insolvent liquidation, or there is no dispute on the evidence that the claimant is insolvent, then a stay of execution will usually be granted. 


• Even if the evidence of the claimant’s present financial position suggests that it is 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 is the same or similar to its financial position at the time that the relevant contract was made; or
  
  (ii) the claimant’s financial position is due, either wholly, or in significant part, to the defendant’s failure to pay those sums which were awarded by the adjudicator. 
  

Court’s Decision

The court concluded that this was a case where it was probable that, should the court refuse a stay and HCPL later established its own cross-claim, WRB would be unable to repay the judgment sum.  While such risk could be addressed, or at least mitigated, by the guarantee offered by WRB Energy Ltd, HCPL had not established that it would be inexpedient to enforce the adjudicator’s decision because:

(i) On its own case, HCPL chose to place the Sub-Contract with a newly formed dormant company.  The risk it now complained of was the inevitable consequence of having placed this Sub-Contract with a dormant company. It was the result for which it contracted.  It would be unfair and contrary to the spirit of the adjudication regime to allow HCPL to now escape its liability to meet an adjudication award on the basis of WRB’s essentially unchanged financial position.

(ii) It was HCPL that resisted the argument that the true sub-contractor was WRB Energy Ltd.  It had essentially made its own bed.

(iii) This judgment became regrettably delayed behind a judgment in another very substantial TCC case.  By the time it is handed down, HCPL will have had ample opportunity to establish its alleged entitlement upon its cross-claims.

Accordingly, the court did not require WRB Energy Ltd to provide a guarantee and it dismissed the application for a stay.

Comments

This case, like J&B Hopkins Ltd v A&V Building Solution Ltd reported in this Newsletter, illustrates that it is difficult to resist enforcement of an adjudicator’s decision and respects the principle of using adjudication as a quick and inexpensive method of temporarily resolving disputes in construction contracts.

Key Contacts

Stanley Lo

Consultant | Litigation and Dispute Resolution

Email or call +852 2826 5395