Rainford House (in Receivership) v Cadogan [2001] HT 01/014

This summary was provided by CMS Cameron McKenna LLP.

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

A party who admits that the claimant is entitled to judgment on an adjudicator's decision may be able to obtain a stay of execution if it can show credible evidence of the claimant's insolvency.

HHJ Richard Seymour QC, Technology & Construction Court

13 February 2001

C employed R under a JCT contract, with Contractor's Design. The case concerned R's application to enforce the adjudicator's award to it of £77,350 by summary judgment.

C disputed that R was entitled to judgment on one ground: that R was in administrative receivership, and therefore that it was inappropriate to enter summary judgment, relying upon the Court of Appeal's judgment in Bouygues v Dahl-Jensen. C said the appointment of the receiver indicated that R was, or probably was, insolvent. C put in further evidence to support this contention from its staff and the contract administrator. C had also served a Defence and Counterclaim alleging breach of contract by R. As an alternative, C asked for a stay of execution on judgment until resolution of the Counterclaim.

C said that there was no difference between the case where the claimant was in liquidation and where it was in administrative receivership. The critical factor was whether there was a risk of injustice to the paying party, who would be called upon to pay whilst being denied the opportunity to pursue his own claims as there would be no money left to pay these. R disagreed, saying that summary judgment should only be denied where liquidation had occurred. R said a stay should not be ordered, as this would deny R the benefit of the award. R accepted that the court had jurisdiction to grant a stay, and that a finding of R's insolvency could be "special circumstances" to justify a stay of execution. R said on the evidence, no such finding should be made, relying on comments from a transcript of an unreported hearing in Herschel Engineering v Breen Property on 28 July 2000.

The Judge decided that the policy of adjudication under HGCRA was a swift mechanism to resolve disputes on a binding, but interim, basis. It was not the policy of HGCRA to transfer between parties the risk of insolvency. This was clear from the fact that "pay when paid" clauses were permissible in insolvency situations (s. 113). Thus if there was a substantial chance, demonstrated by objective evidence such as a winding up order or receiver's appointment, that money would be lost for practical purposes if paid, then that ought to be considered on an application for summary judgment. Vague fears or unsubstantiated rumours of insolvency would not "merit much attention."

Further, if there was credible evidence that the claimant was insolvent, that was a highly material matter for the Court to consider in relation to any claim for a stay of execution. In deciding whether to grant a stay, each case would depend on its own facts. The person applying for the stay should put forward material to demonstrate insolvency of the claimant. However, it would not be necessary to prove when the final determination of the matters that were the subject of the adjudicator's award would take place, or what the financial status of the claimant would then be. The facts of this case meant that C was entitled to a stay of execution, conditional on C paying the amount of the judgment for the award into court.

A party who admits that the claimant is entitled to judgment on an adjudicator's decision may be able to obtain a stay of execution if it can show credible evidence of the claimant's insolvency.

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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