RAWLINGS CONSULTING (UK) LTD v MAELOR FOODS LTD

 

RAWLINGS CONSULTING (UK) LTD v MAELOR FOODS LTD

Technology and Construction Court

His Honour Judge Stephen Davies

16 July 2018

The work items in respect of which the contractor claimed payment were variations to the main contract and were not the subject of separate contracts so that the contractor’s referral to adjudication by reference to the main contract did not deprive the adjudicator of jurisdiction

 

The employer opposed the enforcement of the adjudicator’s award of a specified sum to the adjudicator in respect of its interim payment notice on the ground that the employer failed to give any pay less notice. It opposed enforcement on the basis that the adjudicator lacked jurisdiction because many of the work items included in the payment notice arose under contracts separate from the “main” contract, which was the contract referred to in the contractor’s notice of adjudication.

 

The employer’s jurisdictional challenge was that (i) The contractor purported to refer to adjudication a payment dispute arising under the third contract entered into by the parties, namely the JCT standard building contract with approximate quantities 2011 form ("the main contract") (ii) However, the contractor’s interim payment notice, which contained the work items forming the subject matter of its claim, impermissibly made reference to the earlier two contracts and included claims in respect of work items carried out under quotations which, when accepted by the employer (at least arguably) formed separate contracts and (iii) The adjudicator was wrong to have held that the work items carried out under the quotations were variations to the main contract and therefore lacked jurisdiction.

 

Judge Davies rejected that challenge in the enforcement proceedings. In doing so he stated that the variations clause in the main contract contained alternative procedures with one being the contractor agreeing to provide a quotation which, if accepted and instructed, would form a variation. Whilst the precise procedure was not followed, that was exactly what happened in substance in this case. Any reasonable reader of these quotations, having seen what the quotations said when read against the background information would have the terms of the main contract in mind as part of a factual matrix and would have had no doubt that they were intended to be an offer to vary the main contract, which, if accepted, would have precisely that effect. The references in the quotations to amendment and to acceptance not being legally binding simply meant that until this became an effective variation by being accepted by the employer, its status was not set in stone.

 

THE FULL TEXT OF THE JUDGMENT OF JUDGE DAVIS

 

  1. In this case, the claimant is Rawlings Consulting Limited, represented at the hearing today before me by Mr Justin Mort QC, and Mr Tom Coulson, both instructed by Gordons LLP Solicitors of Leeds, and the defendant is Maelor Foods Limited, represented by Mr Andrew Singer QC, instructed by FBC Manby Bowdler LLP Solicitors of Shrewsbury.

 

Summary judgment

 

  1. The first application before me which I now deal with is the claimant's application for summary judgment to enforce the decision of an adjudicator, Mr Jonathan Cope, made on 21 June 2018. In that decision, having reached what he referred to as "a non-binding conclusion" that he had jurisdiction to make the decision, he proceeded to decide that the claimant was entitled to payment under its interim payment notice, issued on 17 April 2018, in the sum of £720,300 plus VAT.

 

  1. The jurisdictional issue raised by the defendant in the adjudication, which the adjudicator rejected, was that the interim payment notice included claims under multiple contracts so that it followed that disputes arising under more than one contract had been referred to adjudication with the consequence being, according to the defendant, that in the absence of agreement which was not given, the adjudicator had no jurisdiction to determine those disputes. It is the same jurisdictional dispute which the defendant raises before me as a defence to the enforcement claim.

 

  1. As argued before me a number of separate issues arise. Firstly, a point taken by the claimant is that on proper analysis this is not an issue of jurisdiction anyway. If that is right then it of course follows that there can be no dispute about enforcement because there is no dispute which goes to jurisdiction. If that is not right I must go on to consider the further issues which arise. The second issue is whether the adjudicator had jurisdiction to make a binding decision as to whether or not further orders were variations to the original contract or separate contracts. Again, if the answer to that question is yes, there can be no dispute as to enforcement because that decision will remain binding until finally determined. But if the answer to that question is no then the third issue is whether or not the inclusion of claims made for works undertaken under previous contracts in the interim payment notice led to a dispute arising under more than one contract being referred and the fourth issue is whether or not the inclusion of claims made for works undertaken under further orders were, on a proper analysis, claims made under separate contracts rather than under variations to the original contract so that again, it is said, their inclusion led to a dispute under more than one contract being referred. The final issue raised by the claimant is that even if I was persuaded by the defendant's submissions nonetheless since the same issues were decided by HHJ Eyre QC at an earlier hearing on 6 July 2018 I should decide those issues today in the same way as he did on that occasions.

 

Facts

 

  1. I begin by summarising the facts to the extent necessary to deal with this application. The claimant is a building contractor; the defendant processes poultry meat from premises at Pickhill Lane in Wrexham. It is common ground that the parties entered into at least three contracts in 2016 for work to be undertaken at those premises.

 

  1. The first contract, which has been referred to as "the office extension contract", was entered into in May 2016 on a JCT minor works 2011 form and related to the construction of a first-floor office extension for £28,000. The second contract was also entered into in May 2016, this time on a JCT professional pre-contract services agreement form, and related to the design of a rear extension for £50,000. There is then the third contract, which I will refer to as "the main contract," which was entered into in August 2016 on a JCT standard building contract with approximate quantities 2011 form. It was stated to apply to "digging out works only and water treatment works to the rear extension" for the sum of £185,000.

 

  1. It is common ground that this main contract contained a contractual provision for adjudication under the Scheme for Construction Contracts by an adjudicator to be appointed by the Chartered Institute of Arbitrators.

 

  1. It is also common ground that after the entry into the Main Contract further works were instructed by the defendant, but, as I have said, there is a dispute as to whether they were instructed as variations to the main contract or as a series of separate standalone contracts. It is also common ground that these further works were the subject of a series of separate quotations, running from September 2016 through to December 2017 and that those quotations were accepted by the defendant.

 

  1. The first such quotation which I have been shown is dated 28 September 2016. It begins by saying:

 

"Further to recent conversations and various site works, it will be our pleasure to undertake the proposed works as titled above."

 

That was an offer for gas pit works within the new slaughter house extension. The quotation continued with these words:

 

"It is assumed these works will be added to the main contract to avoid resubmitting the F10 and having to reissue the health and safety procedures."

 

The F10 is a reference to the notification to the Health and Safety Executive of a construction project, which had already been submitted in relation to the main contract.

 

  1. There followed a number of commercial provisions and provisions for price allowances and for various exclusions and assumptions. The quotation concluded under a sub-heading entitled "Legal Notice", of which the second bullet point said this:

 

"Acceptance of this letter is not legally binding until the JCT standard building contract with approximate quantities is amended. Any work started before amending the contract, all implied terms within the main contract will apply."

 

And finally:

 

"Terms and Conditions – the JCT contract will form our terms and conditions."

 

  1. The next quotation in time is also financially the most important. It was dated 16 November 2016 and related to the main build to the slaughter house in the sum of £1.35m. It contained the same opening statement as the first quotation to the effect that it was assumed that the works would be added to the main contract to avoid resubmitting the F10. It also contained similar provisions to the first quotation under the headings "Legal Notice" and "Terms and Conditions." This quotation was signed by both parties as was the next one.

 

  1. I do not need to refer to all of the following quotations; they were all to the same or similar effect, containing the same or similar provisions.

 

  1. It is the defendant's case that until March 2016, the claimant made separate applications for payment for individual separate work items but that on 23 March 2016 the claimant submitted its interim application number 6 which was in the form of a gross amount application less amounts previously submitted. That application was not relied upon by the claimant in the adjudication who, instead, relied upon its subsequent interim payment notice dated 17 April 2018. Reliance is placed by both parties on the payment notice because the claimant's case, as referred to adjudication, was that it was the defendant's failure to pay or to dispute in any legally effective way that interim payment notice which was the subject of the claim, whereas as I have said it is the defendant's case is that the payment notice impermissibly included reference both to the earlier two contracts and also made claims under the subsequent quotations which it says were, or at least arguably were, separate contracts.

 

  1. The application included an attached schedule which showed a total gross amount and, after crediting the amount invoiced or paid to date, produced the claimed sub-total of £720,300. The first two items on the schedule referred to the two previous JCT contracts but no balance was claimed in relation to those. The second two related to the works the subject of the main contract and a balance of £70,000 was claimed in relation to those. The remainder related to work items the subject of the subsequent quotations.

 

  1. The claimant served Notice of Adjudication on 16 May 2018. It is clear, and not in dispute, that the Notice of Adjudication identified the relevant contract as being "the main contract" and asserted that the dispute concerned the claimant's entitlement to be paid an interim payment under that contract and the sum claimed under the interim application. It asserted that the claimant was entitled to payment of the amount claimed in the absence of any interim payment notice or payless notice served by the defendant in accordance with the terms of the main contract.

 

  1. The defendant's Response submission to the claimant's Referral submission took fair and square the point about jurisdiction although accepting, as indeed it had to, that both the Notice of Adjudication and the Referral were stated to have been made under the main contract. The adjudicator, having been appointed by the Chartered Institute of Arbitrators, produced a reasoned decision, running to 47 paragraphs over 27 pages. He began by addressing the jurisdiction point and he went on to address the merits. In relation to jurisdiction he referred both to the facts and to the law. In relation to the original two contracts and the reference to them in the schedule he concluded that they did not form part of the dispute because no claim was made in relation to them in the schedule. In relation to the further work items the subject of the quotations he concluded that they were variations to the main contract rather than separate further contracts. He gave detailed reasons for reaching that conclusion including the following to which I shall now refer.

 

  1. Firstly, he concluded that the natural and ordinary meaning of the reference to the main contract in the quotations was that the works would be variations to the main contract, in circumstances where the main contract did not place any restriction on the scope or value of additional works which could be instructed. That is clearly the case. I have been referred to clause 5 of the main contract in relation to variations, which does not place any restriction on the nature or extent of work which may be ordered under that variations clause.

 

  1. Secondly, he concluded that the reference to the need to avoid submitting further F10 forms indicated that the further work was being treated as within the scope of the main contract, for sensible operational meanings.

 

  1. Thirdly, he noted that although the main contract required the contract administrator to instruct variations in writing, which did not appear to have happened, he also noted that there was no sanction provided for in the main contract if that did not happen.

 

  1. Fourthly he concluded that the absence of any formal separate contracts having been entered into in relation to the quotations supported the inference that they were intended to operate as variations to the main contract, given that previously formal separate contracts had been entered into in relation to the earlier works. He noted that the handwritten amendment to a recital in the main contract anticipated that the scope of work under the main contract would evolve, which he regarded as consistent with additional work being instructed under that contract. He was not impressed by the defendant's evidence as to the previous practice in relation to separate payment applications and separate payments as being sufficient to militate against these factors.

 

  1. These enforcement proceedings were commenced following non-compliance by the defendant with the adjudicator's decision. The defendant issued a separate part 8 claim, seeking a determination by the court of the substantive issues determined by the adjudicator in so far as they were issues of law. That was met by a counter-application by the claimant, seeking to refer that dispute to arbitration under the arbitration provision of the main contract. That was the application which came before HHJ Eyre QC on 6 July and which he decided against the defendant to this application, ordering that the dispute should be referred to arbitration.

 

Analysis

 

  1. In my view, it is sensible to consider first the argument advanced by Mr Mort QC and Mr Coulson to the effect that, properly analysed, there is no jurisdictional issue here. The argument proceeds on the basis that under s.108 of the 1996 Construction Act and under para.8 of the Scheme, properly analysed, there is no objection to a referring party referring any dispute, so long as the reference is made by reference to one construction contract, even if the responding party subsequently contends that, properly analysed, in fact, the claim as advanced the subject of the dispute included claims under more than one contract. The argument proceeds on the basis that s.108 is a wide provision which does not expressly prohibit claims being advanced under more than one contract and that para.8, on its proper provision, is simply a permissive provision which allows the adjudicator, with the consent of all of the parties, adjudicating at the same time on related disputes under different contracts, but does not expressly or impliedly prohibit claims being advanced under more than one contract.

 

  1. In contrast, Mr Singer QC submits that s.108(1) is clear and mandatory in its terms, and allows a party to a construction contract, he emphasises the use of the singular, to refer a dispute, again he emphasises the use of the singular, arising under the contract, again he emphasises the use of the singular, for adjudication under a procedure complying with the Act. He submits that the approach taken in all of the authorities thus far and, he submits, endorsed by Sir Peter Coulson in his authoritative textbook Construction Adjudication, is consistent with the assumption that s.108(1) does not allow a dispute to be referred under more than one contract.

 

  1. In my view Mr Singer is undoubtedly right in his analysis on this issue. Section 108(1), on its proper construction, is mandatory; it does not allow a dispute arising under more than one contract to be referred.

 

  1. Paragraph 8 of the scheme does not in my view assist either way in that respect. More importantly in my view Mr Singer is also right in principle, subject to a counter-argument based on the decision of Akenhead J in Air Design v Deerglen [2008] EWHC 3047 (TCC), to which I shall refer, to submit that it is not open to the referring party to avoid this limitation by choosing in the notice of adjudication to refer a dispute under what is said to be one contract if, on proper analysis, the objective reality is that the claim being made and disputed arises under more than one contract. In my view an adjudicator who is met with an objection that there is no jurisdiction because the dispute, on proper analysis, arises under more than one contract, has to determine that point and must, if he agrees with the responding party, decline jurisdiction. He cannot proceed on the basis, subject again to the Air Design argument, that it does not matter so long as the referring party has chosen to refer on the basis of one contract.

 

  1. Before, referring to the decision in Air Design, it seems to me that the sensible course is to consider first whether or not the defendant's objection is made out on the merits. The adjudicator, of course, decided the question on the evidence before him. As Mr Singer rightly submits, I have to decide this case on the basis that this is an enforcement application under CPR Part 24 and thus, as is well established, that all that the defendant needs to establish is that its defence is reasonably arguable. It is well-established that the court cannot, of course, conduct a mini-trial in relation to disputed issues.

 

  1. The first point taken by the defendant, as I have said, is that the reference alone to the two previous contracts in the schedule to the payment notice is itself fatal. In my view the adjudicator was clearly right, for the reasons he gave, to reject that argument. It is quite clear that the schedule provided a full narrative of all of the contracts and claims made in relation to this project but, since it is also quite clear that no claim was being advanced in relation to the two previous contracts, in my view there could be no valid jurisdictional objection taken simply because the schedule included reference to them.

 

  1. The next issue concerns the subsequent quotations. Mr Singer submitted that this was not a dispute which the court could resolve summarily whereas Mr Mort submitted that it could do so. The defendant's evidence, both in the adjudication and before me, refers extensively to the circumstances in which the quotations were provided and accepted and also includes evidence as to what those acting on behalf of the defendant believed was the position when they received and accepted those quotations. But what they do not do is give any evidence that there were any oral discussions between the parties at the time which were, in any way, relevant to the question as to whether or not the quotations were variations to the main contract or separate contracts or, I suppose, on one possible analysis work undertaken under no contract at all. There is no identification by the defendant of any oral evidence which could assist the court at a final hearing in determining the issue. Nor does the defendant identify any potentially relevant documents which have been placed before the court or even which it believes exist or may exist but which it has not been able to place before the court, nor does it identify any further relevant material which might reasonably be expected to be able to be placed before the court when conducting a final hearing which is not before the court today. It is quite clear to me that the dispute involves a consideration of the proper construction of the quotations in circumstances where, as I have said, the evidence shows that they were produced and then simply accepted without there being any further oral or written communications relevant to the terms on which they were accepted. On that basis, the question is one of construction, which the court can and should summarily resolve, as to the effect of the way in which those quotations were expressed in the context of their relevant factual matrix.

 

  1. Both Mr Singer and Mr Mort rightly observed that it is clear that the quotations were produced without the assistance of lawyers. The wording used, as will be apparent from what I have already said, is not entirely clear or consistent. The function of the court in such a case is to make sense of those words so far as sense can properly be given to them.

 

  1. In my view, the opening paragraph, referring to the assumption that the works will be added to the main contract, is important. That is clear in stating the claimant's assumption as to what would happen and there is no evidence that the defendant ever disagreed with that assumption when it accepted the quotations. On the face of it, therefore, it was a common shared assumption which, as the adjudicator said, made obvious sense for any number of reasons, including the stated reasons about the benefits of avoiding duplication of the F10 notices and compliance with health and safety procedures. As the adjudicator also observed, it was also consistent with the handwritten amendment to the main contract itself which envisaged that the work would evolve over time.

 

  1. The legal notice, as Mr Mort realistically accepted, is not a masterpiece of clarity. It could, indeed, be argued that the first sentence; "acceptance of this letter is not legally binding until the standard building contract is amended" could lead to a situation where unless or until there was some formal amendment of the building contract, there would be no binding contract at all. Whilst that, in my view, would be an unlikely scenario, more significantly it is wholly inconsistent with the next sentence:

 

"Any work started before amending the contract, all implied terms within the main contract will apply, and terms and conditions of the JCT contract will form our terms and conditions."

 

Mr Singer suggested that the reference to the JCT contract was ambiguous because it could have referred to the two previous contracts, which were both on JCT standard forms, but that in my view is clearly inconsistent with the explicit reference to the JCT standard building contract with approximate quantities in the previous bullet point and, as Mr Mort submitted, with the factual context.

 

  1. As the adjudicator also observed one has to consider the variations clause in the main contract. The variations clause contained alternative procedures, with one alternative being that a request for a quotation could be made; that the contractor could agree to provide a quotation, which if accepted and instructed would form a variation to the contract. It is clear that although the precise procedure was not followed nonetheless in substance that is exactly what happened in this case. Any reasonable reader of these quotations, would, of course, have the terms of the main contract in mind as part of a factual matrix. It seems to me that any reasonable reader, having seen what the quotations said, when read against the background information, would have had no doubt whatsoever that this was intended to be an offer to vary the main contract, which, if accepted, would have precisely that effect. The reference to amendment and the reference to acceptance not being legally binding simply meant that until this became an effective variation by being accepted by the defendant, then its status was not set in stone. Once it was accepted, as it was, it became a variation. In all of the circumstances it seems to me that there is no real prospect of the defendant establishing, despite Mr Singer's valiant efforts, that these further works could sensibly have been regarded as anything other than variations to the main contract. On that basis, the jurisdictional defence falls away.

 

  1. In the circumstance, it is strictly unnecessary for me to undertake an analysis of the decision in the Air Design case, which Akenhead J considered in his subsequent decision in Supablast v Story Rail [2010] EWHC 56 (TCC) and which I also considered in the case of Viridis v Mulalley [2014] EWHC 268 (TCC). The decision of Akenhead J in Air Design was to the effect that in a case similar to this, where a dispute was referred under a contract the existence of which was not and could not be disputed, but where there was a dispute as to whether or not the claim included claims under other contracts, that was a dispute which went both as to jurisdiction and to substantive issues and, in the learned judge's analysis, in those circumstances the adjudicator had jurisdiction to decide that jurisdictional issue as well as the substantive issues. That was a decision which he reached having conducted an analysis of the competing arguments. It was also a decision which he adhered to in his subsequent decision in Supablast. Mr Singer rightly observed that in both cases it was not strictly necessary for him to reach that decision because in both cases he also decided the case on the basis that on the facts it was not reasonably arguable that there were separate contracts anyway. Nonetheless it clearly represented his considered analysis of the position.

 

  1. It was not necessary for me in Viridis, given the different factual circumstances of that case, to express an opinion one way or another on the correctness of that decision. Nor has any judge subsequently, so far as I have been made aware, needed or ventured to do so. It is a decision referred to in Construction Adjudication by Sir Peter Coulson at para.280, without any suggestion that it was in any way wrongly decided. Nonetheless of course if I had needed to do so I would have had to decide for myself whether or not the decision was right or wrong but on the basis that the correct judicial approach is that I should follow that decision of a judge in a court of co-ordinate jurisdiction unless I am satisfied that it was clearly wrong. I can see that there is room for argument as to whether an adjudicator who has jurisdiction to decide a substantive issue also impliedly has jurisdiction to decide the same issue insofar as it also concerns his own jurisdiction in the absence of an express or implied submission or an estoppel. Nonetheless, and not least because it represents the considered view of a High Court Judge of great eminence and experience in the field, I am far from being satisfied that it is clearly wrong. If, therefore, I had to make the decision on that basis, which I do not, I would have followed Air Design and would have concluded that in this case that point was also determinative against the defendant in relation to the jurisdictional challenge.

 

  1. For all of those reasons, therefore, I am satisfied that there can be no arguable defence to enforcement and that the claimant is entitled to summary judgment.

 

Stay

 

  1. Having ordered summary judgment against the defendant for the amount decided by the adjudicator, £720,000 odd, plus VAT, and having heard submissions on the defendant's application for a stay I must now determine that application.

 

  1. It is, of course, common ground that the court has a discretion to order a stay of execution, and it is also common ground that the relevant principles were summarised by Coulson J in his decision in Wimbledon Construction v Vago [2005] EWHC 1086 (TCC) which has been applied subsequently in many cases. As Coulson J said more recently in Equitix v Bester Generacion [2018] EWHC 177 (TCC) it was never his intention that this should be a summary set in stone, as opposed to a summary of the main points established by the decided cases up to that point in time. Since the Vago case was decided other judges in other cases have also have to consider the circumstances in which it was appropriate to order a stay on the particular facts of those cases. I have been referred to some of them and, particularly, to the decision of Edwards-Stuart J in Galliford Try Building v Estura [2015] EWHC 412 (TCC). It is important to recognise, as has indeed been recognised in the cases, that this is not the exercise of a statutory jurisdiction subject to a statutory code. Instead, it is a question of considering all of the relevant factors and making a decision based on an analysis of those relevant factors in the context of the established principles.

 

  1. In this case, the position is as follows. The claimant has succeeded in enforcing a decision, which was based on the submission of a payment notice, which has been held by the adjudicator to be valid. That decision is, of course, binding as to its substance unless or until determined by agreement or (in this case) by arbitral award and this court has determined that the decision was not infected by any jurisdictional error. It is a relatively substantial amount of money, although not in comparison with the amounts that were being considered in the Galliford Try case or the Equitix case. The defendant is entitled to say, as Mr Singer does, that it is one of a number of cases where a defendant has found itself faced with a substantial adverse adjudicator's decision due to what may be described as a technical failure to fail to serve a valid payment notice or pay less notice in accordance with the requirements of the Construction Act. But, equally, Mr Mort is entitled to say, as he does that the provisions of the Construction Act in relation to payment notices and the like have been in place for many years now and if an employer, under a substantial building contract, does not comply with those provisions - which were clearly introduced by Parliament in order to ameliorate the problems faced by contractors where employers were not dealing with payment applications on a regular or proper basis - it has only itself to blame, and that the policy of the Construction Act in terms of adjudication is clearly that if a contractor is entitled to and obtains an adjudicator's decision in its favour it should get paid so that, if, in effect, the risk of non-payment and the risk of insolvency between the time for payment and the time for final resolution of the dispute is effectively transferred from the contractor to the employer.

 

  1. I agree with Mr Mort that it is on that basis, it seems to me, that the courts have taken the approach which they have, which is to enforce the decision without a stay unless there are what are effectively special circumstances or there would be some manifest injustice in not ordering a stay.

 

  1. The particular consideration which is of most importance here is that referred to in para. 26(f)(i) of the Vago decision. That applies if there is evidence that the claimant would probably be unable to repay the judgment sum if required to do so upon the final determination of the dispute. It is accepted that this may constitute special circumstances, rendering it appropriate to a grant a stay. But that would not usually justify the grant of a stay if the claimant's financial position is the same or similar to its financial position at the time the relevant contract was made.

 

  1. Here, the relevant evidence before the court is comprised in the report produced by the defendant's accountants, Mazars, on 31 May 2018, commenting on the audited and published accounts of the claimant, together with the evidence of Mr Rawlings of the claimant company, attaching more recent management accounts. In summary, the position is that at the time the contracts in question were entered into the claimant's position was that it had net liabilities of somewhere between £80,000 and £270,000 taking the three relevant years straddling that period. Therefore, the claimant is entitled to say that the defendant knew or should have known, or must be taken to have known, that it was entering into substantial contractual arrangements with a building contractor which was neither substantial nor had a substantial asset base. To that extent it was clearly taking that commercial risk into account when deciding to enter into those contractual arrangements.

 

  1. Since that time, matters have improved somewhat and, as Mazars report, the position as at the date of the most recent audited published accounts, the period ended 30 November 2017, is that there are now modest net assets of just over £7,000. In those circumstances Mazars accept, rightly, that the claimant cannot be considered as balance sheet insolvent but they say that it can be considered as having a weak balance sheet.

 

  1. Mr Rawlings' witness statement exhibiting the more recent management accounts shows that there has been an improvement in the financial position since that time. Mr Singer invites me to approach that evidence with some scepticism, given that there are some discrepancies between what those management accounts show for certain balance sheet figures for the period to 30 November 2017 as against the audited accounts for that same period but, frankly, those differences do not seem to me to be material in the context of what this case is about. What the position shows is that for the period to 31 May 2018 turnover has risen to just over £1.7 million, with a net profit of just over £220,000, with net equity rising to £240,000. In paras.13 and 14 of his statement Mr Rawlings also refers to the existing contracts which the claimant has which he says are profitable and that overall the claimant's projected turnover for 2017/2018 is, he says, around £4.5 million.

 

  1. Two points arise from all of this. The first is that Mr Singer submits that nonetheless it is still the case that it still can be said that the claimant company will probably be unable to repay the judgment sum if and in so far as the arbitrator makes an award in favour of the defendant in due course. But more fundamentally he also submits that the principle referred to in para. 22(f)(i) of Vago has no application because here the position of the claimant now is not the same as or similar to better than it was when it entered into the contract because it is better than that position.

 

  1. Before considering those submissions I should explain that the current position is that there is an extant arbitration which, on the face of it, will proceed and will determine the defendant's existing criticisms of the adjudicator's decision in relation to the validity of the payment notice. That, as Mr Singer submits, is a relatively straightforward point of law, which could be determined relatively quickly and, if the claimant is right, would, on the face of it result in an order for repayment of the amount decided to be paid by the adjudicator. The court is not being asked to and nor in my view can or should it form any particular view one way or another in relation to the prospects of success of that arbitration. Having seen the adjudicator's decision it is not a case where the defendant can submit to the court that it has a virtually unanswerable case in the arbitration.

 

  1. However the further point that Mr Singer makes is that the position as regards enforcement having now been clarified by today's decision the defendant will, in any event, before very long – and will happily undertake, if required by the court, to do so - commence a further arbitration seeking what is effectively a determination of the final balance due one way or another from one party to another on the merits. That will clearly, of course, take longer to proceed because it will involve a more detailed investigation than the current arbitration but in which Mr Singer says that on the evidence relied upon by his client, it has a reasonable prospect of obtaining a substantial repayment.

 

  1. The further point which is made is that this is not a case where the defendant's case is that it is not in a financial position to comply with the adjudicator's award and the court's enforcement order. Indeed Mr Singer says, on instructions, that if the court required it the defendant would be in a position to pay the judgment sum into court as a condition of obtaining a stay, although that is, of course, not its primary position. To that extent it is different from the position of the defendant in the Galliford Try case, who made it very clear that it would be unable to do so. It is also right to say that, unlike the Equitix case, this is not a case where the claimant is a special vehicle which has effectively divested itself of any continuing interest in the performance of the contract in question, that being a particular factor which influenced Coulson J in his decision in that case.

 

  1. The starting point is that I accept Mr Singer's submission that on the basis of the current evidence it can be said that there is at least a real risk that the claimant will be unable to repay the judgment sum if the defendant is successful in the subsequent arbitration. It does not seem to me that, in contrast to the jurisdiction to order security for costs, the court is required to make a positive finding as to inability to repay. That is not a jurisdictional requirement for ordering a stay. The position as matters currently stand on my assessment of the evidence is that the claimant will be unable to repay if it was required to repay the full amount. Nonetheless it could be said that in one or two years, if the defendant pursued but lost the current arbitration but pursued the second arbitration and succeeded in obtaining a full or a partial repayment that the claimant may be in a position to repay by them, if things go as well as Mr Rawlings says. It therefore seems to me that the defendant has got part of the way on its application for a stay but I should also bear in mind that this is not a stark case where it can be said that on any view of matters the claimant simply has no prospect whatsoever of repaying any substantial part of the sum awarded under any reasonable circumstances which might exist by the time the dispute is finally determined.

 

  1. Turning to the second point; is the position the same as it was when the contractual arrangement were entered into? Mr Singer's submission was that that principle is not engaged here because in fact the financial position of the claimant is better than it was at the time of contracting. Mr Mort submitted that that should not affect the position because the rationale behind this particular principle as explained above is not undermined in any way by the fact that the contractor is in a better position now than it was when the contractual arrangements were entered into. I prefer and accept Mr Mort's submission on that point. It does not seem to me that it makes any difference if the contractor is in a financially better position now than it was. What is of importance is that the employer knew or must be taken to have known that the contractor was in a poor or at least a modest financial position at the time it entered into the contract when compared with the value of the contractual arrangements undertaken, so that it knew or must be taken to have known that it was entering into a contract with a company which would have cash flow difficulties if it was kept out of money due to it and, potentially, might be unable to repay without difficulty if it obtained a substantial award in adjudication which was subsequently overturned by the court or arbitrator.

 

  1. Having regard to all of the features of the case it does not seem to me that this is one of those cases where grounds properly exist for ordering a stay of execution either in whole or in part. In my view this is a straightforward case where the claimant is entitled to obtain an adjudicator's decision in its favour and to have that decision enforced summarily by the court because it issued a payment notice which, on the adjudicator's analysis, was valid and because the defendant failed to take the steps which it should have taken to protect itself, by issuing - what the adjudicator found - any valid payment or payless notice. Thus it must now pay up in the meantime and until it can, if it is successful, have that decision set aside by an arbitrator. None of the specific circumstances recognised in the other cases as leading to manifest injustice apply here. I consider that if I were to accede to the application for a stay here I would effectively be allowing the policy of the Construction Act to be undermined. Therefore I am going to refuse the application for a stay.

 

Costs

 

  1. I am now summarily assessing costs on the standard basis for the claims in connection with the adjudication enforcement claim, and the application to stay enforcement. The total costs claimed are, leaving aside the £10,000 which appears to have been overpaid in terms of the court fee, £40,900 odd, which in broad terms is broken down as to £22,500 for solicitors time costs, £16,500 for counsel and the balance for various fees and expenses.

 

  1. Mr Singer says that overall this is too much in the context of what he submits is the relatively straightforward business of preparing for an adjudication enforcement case when, in reality, the issue is one of jurisdiction raised and argued before the adjudicator and thus where no new material is required other than the documents required to get the case before the court. He also submits that as regards counsel the defendant ought not to have to pay for anything beyond the reasonable fee of instructing a senior junior, given the amount and complexity of the case.

 

  1. Mr Mort says that it was perfectly reasonable for the claimant to instruct both Mr Coulson as the junior counsel involved in the adjudication and leading counsel on what he emphasises was a fee discounted from what would normally be charged by a silk acting alone. He also submits that the amount of work which had to be done overall, including responding to the stay application, is reasonable. He also draws my attention to a Calderbank Letter, written last week, on the 10th July, open for acceptance until 2.00 pm last Friday 13th, whereby, and leaving aside the question as to the overpaid issue fee, the claimant was prepared to accept the principal sum, together with interest and reimbursement of the adjudicator's fees, but not to seek its costs other than the issue fee. He submits that in those circumstances the defendant cannot complain about paying for the costs of today. Finally he points out that this schedule includes half of the costs of the hearing before Judge Eyre QC last Friday.

 

  1. In my view the court should proceed on the basis of what a paying party, in this case the defendant, ought reasonably to be required to pay for the proper preparation of the adjudication enforcement application and responding to the application for a stay, producing evidence which is appropriate to all of that, by competent solicitors instructing a competent senior junior, in circumstances where the claimant was prepared to waive its costs to avoid the cost of a contested hearing. In my view, the appropriate award of costs adopting that approach is as follows: £17,500 for solicitors' fees; £12,500 for counsel; total of £30,000, together with £510 court fee on the basis that this would be the correct issue fee for adjudication enforcement proceedings adopting the settled policy of the TCC nationally but subject, as I've said, to a direction that this is on the basis that whilst the court considers that the £10,000 issue fee should be refunded there should be permission to apply should that view not for any reason be correct.

 

  1. So the total then will be £30,000 for solicitors and counsel; £510 court fees, plus £500 other.