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NAP v Sun-Land: not such a bad result after all?

Last week Matt blogged about the case of NAP v Sun-Land. He made the point that “it was clear to me that the employer’s representatives were less familiar with the adjudication process than one might like…”. While that may well have been the case, the employer’s representatives nevertheless succeeded in achieving a partial stay of the adjudicator’s decision, so arguably, it was not such a bad result after all.

Let me explain how they achieved the partial stay and the interesting issue that arises from the case.

Sun-Land argued that there was real doubt that NAP would be able to repay the sum awarded by the adjudicator (circa £100k) if the outcome of the dispute differed in the County Court proceedings that were already under way. Sun-Land therefore asked Edwards-Stuart J in the TCC to stay the enforcement of the adjudicator’s decision.

Stay of execution

When applying for a stay of the enforcement of an adjudicator’s decision, the relevant principles are set out in Wimbledon Construction v Derek Vago. NAP relied on the last of the six principles to resist the application:

“(f) Even if the evidence of the claimant’s present financial position suggested 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 a significant part, to the defendant’s failure to pay those sums which were awarded by the adjudicator.”

NAP failed to satisfy either of these criteria. Edwards-Stuart J found that NAP was in a less healthy financial position now than it was in 2005 when it entered into the contract with Sun-Land. He also declined to find that NAP’s current deficit had been caused by Sun-Land’s failure to pay sums due to it.

While, at this point, Sun-Land may have thought that it had managed to achieve a stay of the entire sum the adjudicator awarded, this wasn’t the case. Despite failing the above tests, Edwards-Stuart J was not persuaded that NAP’s present financial position was so bad that it would not be able to repay at least a significant proportion of the sum awarded by the adjudicator. Edwards-Stuart J:

  • Was of the view that NAP would be able to repay an amount in the order of £65,000 (presumably on the basis of the difference between the adjudicator’s award and NAP’s declared deficit of £35,000).
  • Directed that “the execution of the judgment be stayed insofar as it exceeds £65,000…”.

What does this all mean?

We haven’t had an enforcement case concerning stays for a little while, which some may think is surprising given the current economic climate. However, I think that NAP v Sun-Land has raised an interesting issue, in particular concerning the application of the second of the above criteria.

When finding that NAP’s present financial position was not “due, either wholly, or in a significant part, to the defendant’s failure to pay those sums which were awarded by the adjudicator”, Edwards-Stuart J stated that:

“I do not accept that NAP’s current deficit of £36,255 as at 31 January 2010 is attributable to Sun-Land’s failure to pay the sum awarded by the adjudicator, because his Decision was not made until August 2011. It may well be that some money is owed to NAP by Sun-Land in respect of this development, and that that sum should have been paid two or three years ago, but I am in no position to form a view as to Sun-Land’s true liability to NAP (if any). Thus I am not in a position to make any finding as to the extent to which, if at all, NAP’s present financial position has been brought about by a default by Sun-Land.” (Paragraph 68, judgment.)

However, it appears that the adjudicator found that the sum awarded should have been paid before January 2010, and therefore surely this was relevant to NAP’s deficit in Janauary 2010? Also, the second criterion refers to the defendant’s failure to pay the sums awarded by the adjudicator, so the court could have relied on the adjudicator’s findings rather than needing to “form a view as to Sun-Land’s true liability to NAP”.

Lesson for us all?

In my view, the most likely reason for the apparent departure from the test in Wimbledon Construction v Vago was the age of the evidence that NAP relied on to demonstrate its present financial position. I get the impression that, had NAP adduced evidence of its financial position in October 2011 rather than January 2010, the court would have felt more comfortable determining whether this had been caused by Sun-Land’s failure to pay the sum the adjudicator awarded.

This may be a lesson to claimants that the evidence they rely on to demonstrate their present financial position when resisting applications for stays must be as up-to-date as possible.

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