Construction Case Update - Adjudication - Part 5 of 2018

1. Introduction The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 5 of 2018. Kenneth T. Salmon Consultant Solicitor and Katy Ormston Trainee Solicitor at Slater Heelis LLP. The law is stated at 30 September, 2018 and covers two cases on stay of execution, stay to arbitration, continuing enforcement after insolvency, and the power of an adjudicator to determine his own jurisdiction. 2. Enforcement—permission to continue proceedings under s.252 Insolvency Act 1986 Raymond Jeffrey (t/a Premier Construction Services) v David Steene 6 The Claimant contractor referred a dispute over its final account to adjudication and was awarded £109,000 against the Defendant employer. The Defendant failed to pay and the Claimant took enforcement proceedings. The Defendant acknowledged service of the claim form indicating an intention to defend and to contest jurisdiction. Directions were given and a hearing date allocated. A day before it was due to serve its evidence, the Defendant notified the Claimant it was proposing to enter into an individual voluntary arrangement. The Defendant proposed to distribute its available assets to unsecured creditors (including the Claimant) whose debts it agreed and decided were due. The Defendant also obtained an interim County Court order under s.252 of the Insolvency Act 1986 preventing any execution or other legal proceedings being commenced or continued without the permission of the Court. The Claimant now applied for such permission under the same section, in order to enforce an adjudicator’s award. The Defendant argued that permission should be refused. The adjudicator had decided the claim and what was due and there was no need for any further proceedings. In addition the Claimant had been aware of the Defendant’s financial position and the medical condition that was the reason for it. If the Claimant was granted summary judgment he would be in a better position than the other unsecured creditors as the proposal was yet to be approved. The question for the High Court was whether it should exercise the discretion it possessed to allow the proceedings to continue. It appeared that whilst the Claimant was identified as a creditor there was no clear acceptance that the sum awarded was due. The adjudicator’s award had been obtained and the enforcement commenced before notice was given of the proposed IVA and before the County Court proceedings. The Claimant had incurred the costs of the enforcement proceedings and unless summary judgment was given, the sum awarded was still a matter of dispute. Summary judgment would not make the Claimant a secured creditor, or give it an unfair advantage over other creditors. Therefore it was just to give permission to proceed and to grant summary judgment, but not to be enforced without the Court’s permission.

3. Jurisdiction—more than one contract—adjudicator’s power to determine own jurisdiction Maelor Foods Ltd v Rawlings Consulting (UK) Ltd 7 Following on from their success in staying Maelor’s Part 8 proceedings (see under ‘Stay to Arbitration’, below), Rawlings sought summary judgment. Maelor resisted enforcement on grounds that the dispute arose under more than one contract, and the adjudicator could not make a binding decision on that issue as it amounted to his ruling on his own jurisdiction, which they said he had no power to do unless the parties had so agreed. HHJ Judge Stephen Davies decided the adjudicator had to determine the point about the two contracts, as part of the dispute before him. The learned judge would have followed Akenhead’s decision in Air Design 8 in which it was held that an adjudicator can deal with matters “when substance and jurisdiction overlap.” An issue arose as to whether Rawlings could afford to repay the amount of the judgment if later required to do so. Its net assets were better than when it entered into the contract but still modest. In addition it was important that the paying party knew or ought to have known when it entered into the contract that keeping the receiving party out of its money would lead to cash flow problems. It could not be said there was no prospect of it being able to repay the judgment sum. A stay would undermine the principle behind the Act (pay now, argue later) and was refused. 4. Stay to Arbitration—whether ‘dispute’ was “in connection with” enforcement Maelor Foods Ltd v Rawlings Consulting (UK) Ltd 9 The parties’ contract was based on a JCT Standard Form of Building Contract with approximate quantities, 2011 edition. Article 8 of which provided for disputes “arising out of or in connection with” the contract to be referred to arbitration except if the dispute was “in connection with” the enforcement of an adjudicator’s decision. The Claimant Maelor Foods Limited (“Maelor”), wanted to challenge an adjudicator’s decision in favour of Rawlings Consulting (UK) Ltd (“Rawlings”) and brought CPR Part 8 proceedings seeking declarations as to issues of law which had arisen in the adjudication, as to the validity of a payment notice and what sums were due to Rawlings. Rawlings applied to stay Maelor’s application to arbitration under section 9 of the Arbitration Act 1996, on the basis that the claim was not in connection with the enforcement of the decision and did not fall within the exception. The Court agreed. Whilst Part 8 could be used as a pre-emptive strike in anticipation of enforcement proceedings, if made and heard in time, that did not mean that such Part 8 proceedings were in connection with enforcement. The wording of the claim was held to be highly significant. Ultimately the dispute here was one about the parties’ actions under the contract and that dispute had to be stayed to arbitration.


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