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Court proceedings stayed pending payment of four adjudicators' decisions

Practical Law UK Legal Update Case Report 1-501-0164 (Approx. 5 pages)

Court proceedings stayed pending payment of four adjudicators' decisions

by PLC Construction
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A legal update on Anglo Swiss Holding Ltd and others v Packman Lucas Ltd [2009] EWHC 3212 (TCC), where the Technology and Construction Court stayed court proceedings pending the claimants paying four adjudicator's decisions in favour of the defendant.
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In Anglo Swiss Holdings Ltd & Anor v Packman Lucas Ltd [2009] EWHC 3212, the Technology and Construction Court (TCC) held that the claimants' failure to pay four adjudicator's decisions in favour of the defendant was a sufficient ground to stay court proceedings that were seeking to overturn those decisions. However, the court refused to grant a stay of those proceedings based on the claimants' failure to comply with the Pre-Action Protocol for Construction and Engineering Disputes (the Protocol), holding that the Protocol does not apply to court proceedings where the claims are the "same or substantially the same" as issues in a recent adjudication. The court recognised that it would be inappropriate and disproportionate to expect the parties to exchange information again.
Practitioners will not be surprised by the decision to stay proceedings pending the payment of the adjudicator's decisions. Equally, they will welcome Akenhead J's comments about the applicability of the Protocol, especially in light of the reasons Akenhead J gave in Buildability v O'Donnell for non-recovery of a success fee under a contingency fee arrangement.

Background

Adjudication

The Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996) provides for a statutory adjudication scheme that applies to every construction contract. A party to a construction contract has the right to refer a dispute for adjudication "at any time" (section 108, Construction Act 1996). For more information, see Practice note, Adjudication: an introduction to adjudication.

Pre-Action Protocol for Construction and Engineering Disputes

Pre-action protocols govern the conduct of the parties before they commence court proceedings. The Pre-Action Protocol for Construction and Engineering Disputes (the Protocol) applies to all construction and engineering disputes (including professional negligence claims against architects, engineers and quantity surveyors). A claimant does not need to comply with the Protocol if the court proceedings relate to the "same or substantially the same" issues as a recent adjudication (paragraph 1.2, Protocol). For more information, see Practice note, Complying with the Pre-Action Protocol for Construction and Engineering Disputes.

Security for costs

An order for security for costs requires a party to pay money into court, or provide a bond or guarantee, as security for its opponent's costs. The claim is stayed until the security is provided. An order for security for costs protects a party against the risk that it will win at trial and be awarded its costs, but then not be able to enforce that costs order against the other, losing party. For more information, see Quick guide, Security for costs.

Court's jurisdiction to stay proceedings under CPR Part 3.1

The court has wide powers under CPR Part 3.1(2) to stay the "whole or part of" any proceedings, either generally or until a specified event or date. It may also take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, that is, to deal with cases justly (see Glossary term, Overriding objective).

Facts

The parties and the adjudications

The Claimants are companies registered in Jersey. They were formed to acquire and develop properties in London (including the "In and Out" Club in Piccadilly) and Mentmore Towers in Buckinghamshire.
The claimants and Charles Street Holding Ltd (a related company) engaged the defendant to provide engineering services on four developments. Each of the appointments referred to stage payments. Work on the developments ceased and, in mid 2007, payments to the defendant ceased.
On 30 April 2009, the defendant started adjudication proceedings for its outstanding fees. The adjudicator, Mr Christopher Hough, in his four decisions dated 14 June 2009, decided that the claimants (and Charles Street Holdings) should pay the outstanding sums to the defendant.
The defendant started enforcement proceedings when the claimants failed to comply with the adjudicator's decisions. In August 2009, judgment was entered against the claimants and interim charging orders were subsequently made over the claimants' properties. The charging orders were made final in October 2009.
(If you recognise the names of the properties involved in this dispute, we referred to separate proceedings related to the same properties in Legal updates:

Court proceedings

The claimants took no part in the enforcement proceedings, or the applications for interim and final charging orders. However, the day before the charging orders were made final, the claimants issued proceedings seeking to recover from the defendant alleged overpayments on three of the developments.
On 17 November 2009, the defendant issued an application for a stay of the proceedings pending:
  • The parties compliance with the Protocol.
  • The claimants complying with the adjudicator's decisions.
  • The claimants providing security for costs.
(The application also dealt with a consolidation of the claimants' three claims, which was dealt with by consent of the parties.)

Decision

Akenhead J held that the claimants':
  • Failure to comply with the Protocol before starting court proceedings did not give rise to a stay because the court proceedings related to the "same or substantially the same" issues as recent adjudications. It would be inappropriate and disproportionate to expect the parties to exchange information again. (Paragraph 16, judgment.)
  • Failure to honour the adjudicator's decisions in favour of the defendant (and the subsequent charging orders over the claimants' property), was a sufficient ground to stay court proceedings that were seeking to overturn those decisions. In reaching this decision, the court considered CPR part 3.1(2) and noted there was little case law governing a situation where one party sought a stay because the claimant had not complied with its contract or judgments made against it. The court also considered the statutory regime of adjudication under the Construction Act 1996.
  • Claims would be stayed until the claimants provided the first £50,000 tranche of security for costs. The court held that there was reason to believe that the claimants would not be able to pay the defendant's costs, if ordered to do so.
The court described the claimants' conduct as "unreasonable and oppressive" in not complying with the adjudicator's decisions. The claimants had also acted in bad faith by putting forward claims in the court proceedings that they knew were significantly exaggerated (paragraph 25, judgment).

Comment

This judgment reinforces the need for parties to comply with adjudicators' decisions and demonstrates that the courts will not allow parties to undermine the statutory framework of the Construction Act 1996, which is a "pay now, argue later" process. The judgment is also a reminder that the Protocol does not apply to claims that have already been adjudicated. However, Akenhead J's decision on the Protocol may be contrasted with his recent comments in Buildability v O'Donnell, where he decided a party was not entitled to a success fee under a conditional fee arrangement because that party had not complied with the Protocol, even though the subject matter of the court proceedings had been adjudicated previously (see Legal update, Summary assessment of costs in Part 8 proceedings).

Case

Anglo Swiss Holdings Ltd & Anor v Packman Lucas Ltd [2009] EWHC 3212 (TCC)
End of Document
Also Found In
Resource ID 1-501-0164
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Published on 14-Dec-2009
Resource Type Legal update: case report
Jurisdictions
  • England
  • Wales
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