NAP Anglia Ltd v Sun-Land Development Co Limited EWHC 51 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

Summary


(1) There is a fundamental difference between failure to address a substantive defence and failure to address some particular aspect of evidence or element of a party’s submissions. Whilst the former might give rise to a breach of natural justice, the latter would not. (2) Where the successful party to an adjudication applies to the Court to enforce the adjudicator’s award, the fact that litigation is ongoing on the same issues in the county court is not, except in extraordinary circumstances, a reason for staying execution of any summary judgment given by the Court on the application to enforce the adjudicator’s award. (3) In proceedings to enforce an adjudication award, where there was a risk that the claimant would be unable to repay a significant proportion of any judgement granted, the Court could stay execution of part of the judgement.

Technology and Construction Court, Mr Justice Edwards-Stuart

Background

This case concerned an application by the claimant, NAP Anglia Ltd (“NAP”), to enforce an adjudication decision of 7 August 2011. The unusual feature of the case was that the adjudication took place concurrently with a claim in the Norwich County Court in respect of the same dispute, over the value of NAP's final account.

The dispute involved a contract dated 1 August 2005, in which NAP agreed to construct four houses and carry out ancillary works for the defendant, Sun-Land Development Co. Ltd (“Sun-Land”), at a site in Griston, Norfolk, for £728,000. The work suffered substantial delays, and in March 2006 the contract was amended to include an additional four houses. On 14 November 2006 the Contract Administrator issued an interim certificate by which an amount of £105,810 was certified as due to NAP and, according to NAP, was to be paid by 12 December 2006. Sun-Land did not pay and did not issue a withholding notice. On 19 January 2007 NAP purported to terminate the contract for non-payment. Sun-Land argued that the interim certificate was subsequently revised and reissued with the result that the final date for payment was not until 26 January 2007, after NAP had purported to terminate the contract.

In the autumn of 2008 NAP started proceedings in the Norwich County Court for the sum that it claimed was due under its final account. The claim’s progress was slow, and only on 3 June 2011 were the final three days for hearing fixed to take place, on 3-5 October 2011. NAP lost patience with the court proceedings and, on 15 June 2011, it referred the dispute to adjudication.

The Adjudicator awarded NAP £96,334.41 and directed that “provided that payment to me has been made by NAP, the amount of my fees and expenses shall be paid by Sun-Land to NAP”. He assessed these fees and expenses in the sum of £9,855.

On 25 August 2011 NAP started these proceedings, seeking summary judgment to enforce the Adjudicator's c. £105,000 award. At this time, however, NAP had not yet paid the Adjudicator’s fees. In the proceedings, Sun-Land challenged the Adjudicator’s decision on the ground that the Adjudicator did not observe the rules of natural justice in that he did not properly appreciate or have regard to a number of Sun-Land’s submissions in the adjudication. It also argued that, if summary judgment were to be given for NAP, execution of that judgment should be stayed until the decision of the county court be received, or on the ground that NAP's financial position was such that it may not be able to repay the amount of the Adjudicator's award should it be subsequently reversed by the county court.

On 29 September 2011 the three day hearing in the Norwich County Court fixed for 3 October 2011 was put back to 3 January 2012, then later put back again to 30 January 2012.

Issues

The Court was asked to address:

  •  Whether the Adjudicator’s award was unenforceable because the Adjudicator had failed to observe the rules of natural justice.
  • Whether NAP could be awarded summary judgement in respect of the Adjudicator’s fees.
  • Whether the Court should stay execution of any judgment it gave, either on the basis that concurrent related litigation was ongoing in the county court, or on the basis that NAP would be unable to repay the judgment should the concurrent litigation be decided in Sun-Land’s favour.

Decision

The Court held that:

  • Contrary to Sun-Land’s arguments, the Adjudicator had considered and addressed Sun-Land’s submissions in the adjudication.  Even if he had not, there is a fundamental difference between failure to address a substantive defence and failure to address some particular aspect of evidence or element of a party’s submissions. Whilst the former might give rise to a breach of natural justice, the latter would not. All of Sun-Land’s arguments on this point fell into the latter category.
  • NAP’s entitlement to claim the Adjudicator’s fees from Sun-Land was, by the terms of the Adjudicator’s decision, dependant upon NAP having paid those fees to the Adjudicator. Since at the time it issued proceedings NAP had not paid the fees, it did not at that time have a right to claim payment from Sun-Land. This was fatal to NAP’s claim for the fees (it made no difference that NAP had actually paid the Adjudicator the day before the hearing).
  • Accordingly NAP would be granted summary judgment in respect of the main part of the Adjudicator’s award only.
  • A party may refer a dispute to adjudication at any stage, including where that same dispute is the subject of concurrent litigation.
  • Accordingly, except in extraordinary circumstances, the fact that the concurrent litigation was still ongoing at the time when the successful party to the adjudication applied to the Court to enforce the adjudicator’s award was not a reason for staying execution of any summary judgment given by the Court on that application.
  • No such circumstances existed in this case and a stay of execution would not be ordered on this ground.
  • As to whether the Court should stay execution of its judgment on grounds of alleged inability of NAP to repay, the Court had to consider, in the context of this case, (i) whether NAP would be able to repay the judgement sum if the county court in the current litigation decided that NAP was not entitled to it and (ii) the extent to which NAP’s present financial position was the same or similar to its position at the time of entering into the contract.
  • On the basis of the evidence provided to the Court, NAP was in a less healthy position than it was when it entered into the contract. Whilst there was a real risk that it might not be able to repay a sum of the order of £100,000 in March 2012 (which was the earliest date when it appeared to the Court likely that a judgment in the county court proceedings would be given), it probably would be able to repay roughly £65,000.
  • Accordingly the Court stayed execution of that part of the judgement that exceeded £65,000.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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