Galliford Northern Ltd v Markel UK Ltd [2003] Leeds District Registry QBD

This summary was provided by CMS Cameron McKenna LLP.

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The right to an indemnity for the purpose of the Third Parties (Rights against Insurers) Act 1930 will only arise from an adjudicator's award once steps have been taken to enforce that award.

Judge Behrens, Queens Bench Division (Leeds District Registry)

12 May 2003

The claims arose out of a construction project in Leeds in which G was the main contractor and MHA Ltd were consulting structural engineers.  A dispute arose between the parties and was referred to adjudication.  Throughout the adjudication MHA disputed the Adjudicator's jurisdiction on the grounds that no written contract was ever concluded.  The Adjudicator decided that he did have jurisdiction and issued his award in favour of G.  MHA went into voluntary liquidation.  G did not seek to enforce the award against MHA but instead commenced proceedings against Markel, MHA's insurer, to recover the award from Markel under s1 of the Third Parties (Rights against Insurers) Act 1930.

MHA's insurance policy provided that "The indemnity provided by this Certificate is extended to include loss…consequent upon an Adjudicator's Award under a procedure complying with [the 1996 Act]".

S.1 of the 1930 Act provides that, in the event that a company who has insurance against liabilities to third parties goes into voluntary liquidation, and has incurred a liability to a third party, then the company's rights against the insurer under its policy will be transferred and vested in the third party. 

Markel defended the enforcement proceedings on the basis that, although a resolution for the voluntary winding up of MHA had been passed, MHA's liability to G had not yet crystallised.  They argued this on the basis that an adjudicator's award is not sufficient in itself to crystallise a liability:  for that liability to arise G would have had had to take steps to enforce the adjudication award.  Until this time, the terms under which the adjudication proceeded were such that the adjudicator's award only gave rise to a contractual liability to pay.  Market therefore argued that the liability could not arise until G had taken steps to enforce the award as the adjudicator's award was by its very nature provisional and could still be set aside for want of jurisdiction.

The court agreed with Markel's submissions.  It found that the adjudication award only created a contractual obligation on MHA to pay G and therefore it was not an absolute obligation to pay.  Liability under the policy would therefore not be established until the adjudication award was enforced by a judgement of the court or agreement.  As G had taken no steps to enforce the award against MHA the proceedings against the insurer had been issued prematurely and were dismissed.

G was given leave to appeal.

The right to an indemnity for the purpose of the Third Parties (Rights against Insurers) Act 1930 will only arise from an adjudicator's award once steps have been taken to enforce that award.

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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