Rush to judgment – enforcement of construction adjudicators’ decisions

Facts

Alexander & Law Ltd (“Alexander”) – the Contractor - was engaged by Coverside (21 BPR) Ltd (“Coverside”) – the Employer - to carry out building works in March 2011.

Relations between the two soured and two years later Coverside terminated Alexander’s contract. Alexander then ceased trading.

Following termination, in June 2013 Alexander commenced an adjudication against Coverside and in August 2013, the Adjudicator awarded Alexander just shy of £200,000. Crucially, the Adjudicator stated that the latest date Coverside should have made payment to Alexander was the end of March 2013 (a week or so after Alexander ceased trading).

Proceedings

Coverside refused to pay the Adjudicator’s Decision and Alexander applied to the Technology and Construction Court to enforce it.

In the meantime, a Petition had been issued by a creditor of Alexander seeking the liquidation of Alexander (Liquidation is a procedure by which assets of a company are sold and the proceeds are distributed to the company’s creditors. A Court order is required to compulsorily liquidate a company).

A race then followed to get to the Court first. Would it be Alexander who could then recover the £200,000 (and therefore stave off the threatened liquidation) or would it be the creditors who would liquidate Alexander?

Alexander got to the Court first, just.

Judgment

The Court granted Summary Judgment in favour of Alexander although stayed (i.e. suspended) enforcement of that Order pending determination of the liquidation proceedings.

What particularly influenced the Court’s decision here was the fact that Alexander had ceased trading a week or so before the sum of £200,000 should have been paid under the contract.

How could this affect you?

The result of this case may have been very different had Alexander played its metaphorical cards differently. Specifically:

1.  It didn't start the Adjudication until three months after it had ceased trading

2.  Alexander didn't apply to be placed into administration (a procedure by which a company can be re-organised under the protection of a moratorium on the bringing of claims against it) and

3.  The managing director of Alexander formed what appeared to be a ‘phoenix’ company shortly after Alexander ceased trading to take over Alexander’s contracts, a point that played particularly badly with the Judge.

While no new propositions of law were developed in this case, from a practical perspective the case provides invaluable insight into how the Courts will deal with the ever more common problem of enforcement of Adjudicator’s Decisions in the insolvency context.

For more in-depth information about this case visit: https://www.bailii.org/ew/cases/EWHC/TCC/2013/3949.html

If you have any queries about construction adjudicatiors' decisions contact Julian Kirkpatrick in our Construction & Engineering team on 01225 730 161 or [email protected]