This month’s contract clinic question comes from a contractor on the sharp end of an adjudication award over a cladding remediation project. Nicholas Zeolla of sets out the options for contesting an adjudication project.
The question:
Help – I have received a (wrong) adjudication award against my construction company. This is due to a dispute over costs, resulting from delays to cladding remediation on a residential block in Coventry. I am worried that if I pay out the award now, the subcontractor with the award will go bankrupt and I won’t be able to recover my money in the courts. What can I do?
The answer
One option in this scenario is to consider applying for a stay of execution of the adjudication award until the issues in the adjudication have been finally determined through the courts.
In principle, a court may grant a stay of execution of a judgment. This will either be absolutely, or for such period and subject to such conditions as it thinks fit, if the court is satisfied that “there are special circumstances which render it inexpedient to enforce the judgment or order”.
The principles applicable to the granting of a stay of execution of an adjudication award where there are concerns as to the solvency of a judgment creditor (in this case the subcontractor) were set out in Wimbledon Construction Co 2000 Ltd v Vago [2005] 101 Con LR 99, at paragraph 26.
That case recognised that a stay of execution may be appropriate where there is “a probable inability of the claimant to repay the judgment sum (awarded by the adjudicator and enforced by way of summary judgment) at the end of the substantive trial, or arbitration hearing”.
Where the claimant is actually in insolvent liquidation or where there is “no dispute on the evidence that the claimant is insolvent”, a stay will “usually be granted”.
That can be contrasted with where the claimant’s financial position suggests only a “probable inability” to repay the judgment sum. In that case it must (usually, at least) further be proved that:
The claimant’s financial position has deteriorated when compared with when the contract was made; and
The claimant’s poor and deteriorating condition was not caused either wholly or in significant part by the defendant’s failure to pay the sums awarded by the adjudicator.
Read the full response in Construction Management Magazine.
If this is something you need any assistance with, please get in contact with the team.