In South Coast Construction Ltd v Iverson Road Ltd, the contractor obtained an adjudicator’s decision in its favour, awarding it nearly £900,000. The employer did not pay and so the contractor commenced enforcement proceedings in the normal way.
What made this case different to a standard adjudication enforcement claim was the fact that the employer served a notice of intention to appoint an administrator (NOI). The effect of this was to impose an automatic statutory moratorium of ten working days (paragraphs 43 and 44, Schedule 1B to the Insolvency Act 1986).
South Coast Construction’s applications
The contractor’s application for summary judgment to enforce the adjudicator’s decision was listed for hearing on the last day of the moratorium (18 January). The court has the power to permit proceedings to continue notwithstanding the statutory moratorium, so the question for Coulson J was whether he should allow the claim to continue.
Strictly speaking, Coulson J avoided deciding the issue by delivering his judgment the following day (19 January), by which time the moratorium had ended, and the employer had entered members’ voluntary liquidation (which does not automatically impose a moratorium). However, he gave a reasoned judgment as it had been fully argued, was relevant to costs and, of most interest, he considered that it:
“…has wide ramifications, and may be relevant to other cases in the months to come.”
Where the claim is merely a money claim, it will only be in “exceptional cases” that the court will allow proceedings to continue (AES Barry v TXU Europe Energy Trading).
Was there anything exceptional about this case?
On the face of it, there was not. However, Coulson J nonetheless decided that he would have given permission for the enforcement claim to continue and gave two separate reasons for doing so.
Firstly, the balancing exercise favoured allowing the claim to continue. The proceedings were very far advanced. No additional costs would be incurred by deciding the enforcement claim and it would be of no benefit to anyone for the court to decline to determine the enforceability of the adjudicator’s decision. He was critical of the employer’s conduct (in total three NOIs had been served, containing no evidence of the financial position of the company, and neither the contractor nor the court had been informed of the NOIs at the time).
Secondly, Coulson J relied on the nature and purpose of statutory adjudication. He referred to the well-known dicta of Chadwick LJ in Carillion Construction v Devonport Royal Dockyard in relation to the “pay now, argue later” nature of adjudication decisions and said:
“Proceedings issued to enforce the decision of a construction adjudicator therefore differ in significant respects from other kinds of commercial proceedings or monetary claims. I venture to suggest that the regime described by Chadwick LJ is unique, without any real parallel in other parts of the High Court. Adjudication enforcement proceedings such as these presuppose that there has already been a decision, on the merits, by an adjudicator, that there is a sum of money which, prima facie, is due and owing under the contract or pursuant to statute. Indeed, such enforcement proceedings presuppose that the defendant is in breach of contract or in breach of statute for not paying the sum found due by the adjudicator. … I consider that a party such as the claimant, who has a decision in its favour from an adjudicator, is in a much better position than most to argue that the court should exercise its discretion to continue to an enforcement hearing.”
As far as I know this is the first reported decision in which the TCC has considered the interplay between the adjudication regime under the Construction Act 1996 and the insolvency regime in relation to administration under Schedule B1 to the Insolvency Act 1986.
While strictly obiter, Coulson J’s approach is likely to be followed by the other TCC judges. It is consistent with the TCC’s pro-enforcement stance in relation to adjudicator’s decisions and the reluctance to allow the insolvency of parties against whom adjudicator’s decisions have been made to act as a bar to immediate enforcement.
However, it remains to be seen what approach the court would take if, for example, the issue arose earlier in the adjudication enforcement proceedings and there could be no criticism of the defendant’s conduct:
- Would Coulson J’s second reason be sufficient on its own?
- If the balancing exercise did not favour allowing the claim to continue, would permission be given simply because it was a claim to enforce an adjudication decision?
This is not clear from Coulson J’s judgment. I suspect, as with most cases, it will be a question of fact and degree – but this decision gives a clear indication of the way the wind is blowing.