17-12-2009
No change in judicial stance on enforcement of adjudication awards
It is rare for the Technology and Construction Court (TCC) to be presented with arguments against the enforcement of adjudicators’ decisions, based on allegations of fraudulent activity by a contractor. This is however, precisely what happened here.
In this particular case, the contractor was accused of having removed certain items from the developers’ possession. The court found that these items amounted to “arisings and debris from a demolition site” and, therefore, in the absence of any agreement to the contrary, the contractor was perfectly entitled to sell them on without committing any fraud.
The court reinforced its opinion that allegations of fraud will only succeed where there is clear and indisputable evidence to support such assertions. Recognising that most parties submit applications for payment because they honestly believe that they are entitled to them, the judge went on to say that even if applications had been overstated, that does not necessarily amount to fraud.
Additional arguments were put forward by the developers in a further attempt to prevent the enforcement of the adjudicators’ awards.
The first argument – that the court should defer enforcement to await the outcome of other disputes between the parties, as they may alter the overall balance owing – was dismissed. It was noted that such practice would be to deny payment of an unpaid certificate and be contrary to the Act.
The second argument was based on the contractor’s purported inability to repay the sum if the matter were to go to trial. Once again this rests on being able to provide proper evidence, in particular that the insolvency has been caused by reasons completely independent from the actual non-payment of the adjudicator’s award itself. The judge made it clear that there is a fine balance to be struck between denying the claimant its money and it going under and the significant chance that it may go under anyway.
Enforcing two adjudicators’ awards, the judge provided a useful summary as to when the court might be prepared to order a stay of execution of enforcement; in particular where:
The judge added to these grounds by suggesting that fraud, as alleged here, may constitute a rare defence to enforcement of an adjudicator’s award if it:
In the current economic climate, all parties seek to protect their cash flow by various means including set off.
This case is one in a long line reminding us that the courts do not stand for any nonsense concerning enforcement of interim payments. There are still very narrow circumstances when summary judgement will not be granted or a stay of execution of enforcement will succeed.
NB: BPE Solicitors’ Construction & Engineering team acted for the successful claimant contractor in this case.
In this particular case, the contractor was accused of having removed certain items from the developers’ possession. The court found that these items amounted to “arisings and debris from a demolition site” and, therefore, in the absence of any agreement to the contrary, the contractor was perfectly entitled to sell them on without committing any fraud.
The court reinforced its opinion that allegations of fraud will only succeed where there is clear and indisputable evidence to support such assertions. Recognising that most parties submit applications for payment because they honestly believe that they are entitled to them, the judge went on to say that even if applications had been overstated, that does not necessarily amount to fraud.
Additional arguments were put forward by the developers in a further attempt to prevent the enforcement of the adjudicators’ awards.
The first argument – that the court should defer enforcement to await the outcome of other disputes between the parties, as they may alter the overall balance owing – was dismissed. It was noted that such practice would be to deny payment of an unpaid certificate and be contrary to the Act.
The second argument was based on the contractor’s purported inability to repay the sum if the matter were to go to trial. Once again this rests on being able to provide proper evidence, in particular that the insolvency has been caused by reasons completely independent from the actual non-payment of the adjudicator’s award itself. The judge made it clear that there is a fine balance to be struck between denying the claimant its money and it going under and the significant chance that it may go under anyway.
Enforcing two adjudicators’ awards, the judge provided a useful summary as to when the court might be prepared to order a stay of execution of enforcement; in particular where:
- the claimant is unable to repay the judgment sum at the end of a substantive trial, which may mean it is inappropriate for the court to enforce the adjudicator’s award;
- it can be proven that the claimant is in insolvent liquidation, or there is no dispute that the claimant is insolvent;
- it is shown that the claimant’s financial position is not the same or similar to its position at the time of entering into the relevant contract OR the precarious financial position is not due in whole or in part to the defendant’s failure to pay the sums awarded by the adjudicator.
The judge added to these grounds by suggesting that fraud, as alleged here, may constitute a rare defence to enforcement of an adjudicator’s award if it:
- is a real defence supported by clear and unambiguous evidence;
- arises after the adjudication and involves matters relating to the contract in dispute (not pursuant to a separate contract); and
- has not already been decided upon by the adjudicator.
In the current economic climate, all parties seek to protect their cash flow by various means including set off.
This case is one in a long line reminding us that the courts do not stand for any nonsense concerning enforcement of interim payments. There are still very narrow circumstances when summary judgement will not be granted or a stay of execution of enforcement will succeed.
NB: BPE Solicitors’ Construction & Engineering team acted for the successful claimant contractor in this case.
