As regular readers will know, the courts will enforce adjudicator’s decisions unless the adjudicator lacked jurisdiction or there is a breach of the rules of natural justice. Once armed with a court order enforcing an adjudicator’s decision, there are a number of ways of seeking to enforce that order to obtain payment.
In the recent (January 2010) case of MFP Foundations & Piling Ltd v Mr and Mrs Shaw, the contractor obtained an adjudicator’s decision against the Shaws. The Shaws did not pay, so the contractor got a court order enforcing the adjudicator’s decision. So far, so normal.
The Shaws did not pay the sums ordered by the court so the contractor issued statutory demands against them for the amount of the adjudicator’s decision, which was now the subject of a court order. The Shaws applied to court to have those statutory demands set aside on the ground that they had a cross claim which equalled or exceeded the amount of the adjudicator’s award.
The contractor succeeded in the county court, and the Shaw’s application to set aside the demands was dismissed. However the Shaws appealed.
On appeal, the court found that where there was a valid cross claim which equalled or exceeded the amount of an adjudicator’s decision, the court could exercise its discretion to set aside the statutory demand under the Insolvency Rules. Importantly, the court took the view that, although enforcement of adjudicators’ decisions generally operates on a “pay now, litigate later” approach, that did not override the principles set out in the Insolvency Rules.
In light of this decision, parties that obtain an adjudicator’s decision in their favour will need to think very carefully before seeking to enforce that decision by the insolvency/ bankruptcy route where there is likely to be a valid cross claim. This does not mean the decision cannot be enforced after judgment is obtained, but rather that consideration needs to be given to the most appropriate enforcement route.
For more information or advice on adjudicators' decisions and statutory demands, please contact the author
Stuart Thwaites.
This article was first published in
Construction News Update, Spring 2010.
