The TCC has recently looked again at the question of whether there should be a stay of execution of an adjudicator's award where the successful party in the adjudication is insolvent. In Mead General Building Ltd (subject to a Company Voluntary Arrangement) –v- Dartmoor Property Ltd [2009] EWHC200 (TCC), Mr Justice Coulson looked at the position of a company subject to a company voluntary arrangement (CVA). The courts had not previously considered this type of insolvency procedure although they have considered others such as administration, administrative receivership and liquidation.

Mead had been awarded just under £350,000 in an adjudication against Dartmoor. Dartmoor refused to pay. Mead applied to the TCC for enforcement of the award and Dartmoor resisted, one of the grounds being that Mead were subject to a CVA and therefore insolvent and unable to pay back any sums that might be awarded in the event of future arbitration.

The Judge reiterated the principles he had set out in Wimbledon Construction Co 2000 Ltd –v- Derek Vago [2005] BLR374. He set out six general principles, which can be summarised as follows:

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

(b) In consequence, adjudicator's decisions are intended to be enforced summarily and the claimant should not generally be kept out of its money.

(c) In an application to stay the execution of summary judgment arising out of an adjudicator's decision, the court must exercise its discretion under Order 47 CPR with considerations (a) and (b) firmly in mind.

(d) The probable inability of the claimant to repay the judgment sum at the end of the substantive trial, or arbitration hearing, may constitute special circumstances within the meaning of Order 47 rule 1(1)(a) rendering it appropriate to grant a stay.

(e) 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.

(f) 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, 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.

In these circumstances the judge held that Mead's financial difficulties were largely attributable to Dartmoor's failure to pay, and that the CVA was the result of that failure to pay. He also held that Mead were trading successfully under the CVA and there was evidence before him that the CVA was likely to be successful and that Mead could trade there way out of their current difficulties.

He therefore made an order that Mead were entitled to immediate enforcement of the adjudicator's award.

This case is a timely reminder of the principles that the courts will apply in an insolvency situation and also serves as a warning where the defendant's conduct in failing to pay has put the claimant into an insolvency situation.

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