NOBLE CONSTRUCTION LTD v WILSON

NOBLE CONSTRUCTION LTD v WILSON

There should be no stay of execution of the judgment enforcing the adjudicator’s award on the grounds that the contractor would seek to dissipate its assets or to organise its financial affairs so as to dissipate or dispose of the sum awarded or that the homeowner offered to provide security for that sum
 

NOBLE CONSTRUCTION LTD v WILSON
Technology and Construction Court
Veronique Buehrlen QC (Sitting as a Deputy Judge of the High Court)
20 June 2019

There should be no stay of execution of the judgment enforcing the adjudicator’s award on the grounds that the contractor would seek to dissipate its assets or to organise its financial affairs so as to dissipate or dispose of the sum awarded or that the homeowner offered to provide security for that sum.

As to the ground that the contractor would seek to dissipate its assets or to organise its financial affairs so as to dissipate or dispose of the sum awarded so that it would not be available to be repaid should the homeowner ultimately succeed at trial, the judge stated that there was no evidence to this effect. The fact that the contractor company was owned and operated by one individual and that like any limited company it might be placed in creditors’ voluntary liquidation at any time was not evidence of there being a real risk of the contractor organising itself so as to dissipate or dispose of the adjudication sum. The facts were nothing like those in a previous case in which there was evidence of threats having been made to wind up Grosvenor and real issues as to the financial viability of the referring party company and as to its statutory accounts that were not satisfactorily explained to the court. There was also not sufficient evidence to support the homeowner’s assertion that the contractor had consistently acted in a duplicitous manner. The fact that the contractor might well be all sorts of errors in the final account, for instance, did not translate into fraud. The homeowner disagreed with the contractor’s evidence during the adjudication but it was open to the adjudicator to prefer certain aspects of that evidence to that of the homeowner, which he did. Also the contractor was clearly not insolvent and evidence was presented by it to that effect.

As to the ground that the homeowner offered security in the amount awarded by the adjudicator, the judge said that the whole point of the statutory adjudication scheme is that adjudicator’s awards should be paid and paid promptly. The scheme is based on the principle of “pay now and argue later”. The key purpose of the scheme is to safeguard the cash flow of the contractors. If a defendant could obtain a stay by offering security instead of payment, that would undermine the very purpose of the scheme. Accordingly, the offer did not provide a basis on which the court could exercise its discretion to grant a stay.

THE FULL TEXT OF THE JUDGMENT OF VERONIQUE BUEHRLEN QC

1. This is the hearing of an application dated 16 April 2019 made by the claimant, Noble Construction Limited (”NCL”), to enforce the adjudication decision of Mr R J Shawyer dated 4 April 2019 by way of summary judgment. Mr Wilson is acting in person. He has filed a document entitled “defence and request for stay of execution” as well as a short skeleton argument. As Mr Wilson has explained this morning, he objects to the application for summary judgment for the reasons set out, in summary form, in his defence and as further expanded before me this morning. He also submits that if there is to be summary judgment, he applies for a stay of execution.

2. I therefore deal first with NCL’s application for summary judgment before addressing Mr Wilson’s application for a stay.

The Claimant’s Summary Judgment Application

3. The dispute between the parties arises out of a JCT Minor Works Building Contract dated 27 September 2017 for works at Mr Wilson’s property at “St Levan”, Treverbyn Road, Padstow, PL28 8DW. Mr Mitchell explains some of the background to the dispute at paras. 5 to 15 of his witness statement served on behalf of NCL. In short:

(1) Mr Wilson sought to terminate the contract on 23 November 2018 alleging repudiatory breach of contract on the part of NCL;

(2) NCL took the view that Mr Wilson’s attempt to terminate the contract was itself a repudiatory breach of contract which they accepted; NCL then submitted a termination account, claiming some £117,124 from Mr Wilson; Mr Wilson did not pay that sum or any other sum in relation to the termination account;

(3) NCL served a notice of adjudication on 4 March followed by a Referral dated 8 March 2019 referring the dispute as to termination of the contract and the termination account to adjudication;

(4) The adjudicator published his decision on 4 April 2019. In that decision, he decided that Mr Wilson had repudiated the contract and he valued the termination account and ordered Mr Wilson to pay NCL some £81,053 within seven days of the date of the decision. He also ordered Mr Wilson to pay interest on the sum of £81,053 from 7 February 2019 until the date of payment at the contractual rate of 5 per cent over the official base rate of the Bank of England. He also ordered Mr Wilson to pay his fees in the sum of £8,425.50, although NCL was jointly and severally liable to pay those fees in the first instance and to recover them subsequently from Mr Wilson.

4. To date Mr Wilson has not complied with the adjudicator’s decision, hence the commencement of these proceedings on 16 April 2019 and the application for summary judgment.

5. In accordance with the directions given by Fraser J on 29 April, Mr Wilson served his defence on 28 May when he also made clear his intention to apply for a stay and NCL served their evidence in reply on 5 June 2019.

6. Clause 7.2 of the contract provides that:

”7.2 If a dispute or difference arises under this Contract which either party wishes to refer to adjudication, the Scheme shall apply, except that for the purposes of the Scheme the adjudicator shall be the person, if any, of the nominating body that should be stated in the Contract particulars.”

7. “The Scheme” is defined in clause 1.2 of the contract and Part 1 of the Schedule to the Scheme for Construction of Contracts (England and Wales) Regulations 1998. Paragraph 23.2 of the Scheme states that the decision of the adjudicator shall be binding on the parties and they shall comply with it until the dispute is finally determined by legal proceedings by arbitration or by agreement between the parties.

8. The applicable test on an application for summary judgment is set out at Part 24.2 of the CPR. It states, in so far as is relevant for present purposes, that:

”(1) the court may give summary judgment against a …defendant on the whole of the claim or on a particular issue if

(a) it considers that -

(ii) that defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other compelling reason why the case or issue should be disposed of at a trial.”

9. Now, the defences raised by Mr Wilson are set out at paras. 4 to 11 of his defence document, and he has expanded upon those before me this morning. What I propose to do is deal with each of the matters raised in turn. Before I do that, I note that there is no challenge to the jurisdiction of the adjudicator. That is right and proper in circumstances in which Mr Wilson fully participated in the adjudication proceedings and did not take any issue with the adjudicator’s jurisdiction during the course of the adjudication.

The first complaint

10. The first complaint raised by Mr Wilson concerns the adjudicator’s reasoning as to the agreed contract price and what Mr Wilson describes as “the adjudicator’s erroneous assertion that the “correct” contract price was £678,821.91” when the adjudicator based the termination account on a wholly different figure.

11. This complaint does not provide grounds for successfully resisting NCL’s summary judgment application. Firstly, it is well accepted that providing the adjudicator was answering the question referred to him, any errors of procedure or fact or law will not provide any basis for resisting enforcement of the decision. I need do no more than refer para. 82.2 of the judgment of Jackson J (as he then was) in Carillion Construction v Devonport Royal Dockyard Ltd. [2005] EWHC 778 (TCC). The overriding principle on any application to enforce the decision of the adjudicator is that the court will always endeavour to enforce such decisions. That was made clear at paras. 85-87 of the judgment of Chadwick LJ in the Carillion Construction Ltd case.

12. Further, it is only if the reasons given by an adjudicator are “so incoherent that it is impossible for the reasonable reader to make sense of them” that a decision will not be enforced. I am referring here to the judgment of Coulson J (as he then was) in Balfour Beatty Construction, citing Clerk LJ in Gillies Ramsay Diamond & Ors v PJS Enterprises Ltd [2003] BLR 48.

13. In the part of the decision Mr Wilson complains of, the adjudicator was addressing the question of what documents formed the contract. I have read paras. 6.28 to 6.35 of the decision and I can see why Mr Wilson complains as to the clarity of the adjudicator’s reasoning. However, that lack of clarity is a far cry from concluding that the reasons are so incoherent that it is impossible for the reasonable reader to make sense of them. Indeed, on a careful reading of these paragraphs of the decision, it becomes clear that what was being said by the adjudicator was that having originally agreed a contract price of £678,821.91 the parties subsequently entered into a JCT Minor Works Building Contract at the lower contract price of £554,003.16, together with a reduced scope of work. Whilst poorly expressed, when paras. 6.28 to 6.35 are read as a whole it becomes obvious that the adjudicator did not conclude that the correct (by which I mean final) contract price as £678,821.91 as submitted by Mr Wilson. Indeed, it is clear from para. 6.36 of the decision, heading up the following section of the decision, that the adjudicator had concluded that the contract price was £554.003.16.

The second complaint

14. The second complaint that Mr Wilson raises is that NCL produced false witness statements for the purposes of the adjudication. That is that Mr Wilson did not accept those witness statements as an accurate account, in particular as to what tender pricing documents he had been provided with at the contract signing meeting. However, this complaint does not give rise to any basis on which to resist NCL’s application for summary judgment. It is clear from para. 6.34 of the decision that the adjudicator considered all the factual witness evidence on this issue, but that he preferred the evidence of NCL as it was open to him to do.

The third complaint

15. The third complaint that Mr Wilson raises concerns NCL’s behaviour as to pricing of all stages and elements of the project. He says that their behaviour and the pricing was deceptive but that this is illustrated by the termination account. This morning Mr Wilson raised three particular points in relation to the pricing and the termination account. Double counting in relation to plastering, being the first item; the second item being a charge for windows when Mr Wilson explained that it had been agreed that he would pay for the windows, which he explains he did; and the third item concerning a relatively small amount of money (some £750) relating to double counting for the temporary electricity panel on the site. However, it has become apparent that these are all issues that could and should have been raised in the context of the adjudication. Indeed, I have seen that all the emails that Mr Wilson referred me to this morning in fact formed part of Appendix D of the claimant’s reply in the adjudication. In those circumstances there can be no doubt that these issues cannot give rise to a basis on which to resist the application for summary judgment.

16. As regards the issues as to pricing: several of those issues certainly were before the adjudicator and they are issues that he addressed when making his findings in relation to the termination account. As is immediately apparent from the decision, the adjudicator did not accept all of NCL’s termination account. On the contrary, he valued the account at some £81,053 as against the £117,000 odd claimed. So, once more, if any of the adjudicator’s decisions on these points are wrong, that is not a ground that can be relied upon by Mr Wilson to resist the enforcement of the decision, and if any further point has now occurred to Mr Wilson, that is a matter which could and should have been raised in the context of the adjudication.

The fourth complaint

17. The fourth complaint that Mr Wilson raises is that he says it has become apparent to him since the commencement of the adjudication that NCL and the architect appointed by Mr Wilson, Mark Gregory at MSG Arc Build, colluded during the project and had conversations regarding the pricing, for instance, without Mr Wilson’s knowledge. In particular, Mr Wilson relies on an email which is at p.180 of the bundle dated 17 May 2017 sent by Mr Gregory to Paul Critchley at the claimant contractors. In particular he has highlighted to me part of that email which arose in the context of what were clearly disputes as to what overall figures and sums were due. The architect wrote:

”And I agree with you and will back you up at every opportunity, but just so that you are aware, as I am sure you are, I am working for the client and therefore cannot be seen to be too close to NCL and be seen to be backing him up where required…”

- by which I assume he meant “and must be seen to be backing him up where required.”

18. The allegation of collusion is obviously a serious allegation to make against a professional. It is not supported by the evidence provided by Mr Wilson. I say that because in my view this email does not evidence some kind of collusion or fraud. What this email illustrates is the architect trying to manage what was quite obviously a very difficult situation, one in which his client and the contractor had fallen out and he was the party no doubt in the middle trying to obtain some sort of resolution.

19. I also note that this is an email that was available and before the adjudicator during the course of the adjudication, and therefore to the extent that Mr Wilson wished to make submissions in relation to it, there is no reason why those could not have been made to the adjudicator in the course of the adjudication.

20. For the reasons I have stated, in my judgment there is no basis for resisting NCL’s application for summary judgment, and I therefore now turn to consider Mr Wilson’s application for a stay.

The stay of execution application

21. Mr Wilson requests a stay on a number of grounds. Firstly, he indicates that he intends to bring proceedings to finally determine the dispute between himself and NCL. Secondly, he justifies the application on the grounds that “liquidation is a credible threat as a preference for the claimant if payment of any amount to [Mr Wilson] by the court”. In support of that ground Mr Wilson relies on the judgment of Fraser J in Grosvenor London Limited v Aygun Aluminium Ltd [2018] at EWHC, 227. Thirdly, and as an alternative, Mr Wilson proposes that he offer security for the amount of the claim pending a final decision from the court as to the dispute.

22. The principles that apply to a stay of execution of a judgment given on an adjudicator’s decision were most recently reviewed and reiterated by Fraser J in Grosvenor London case referred to by Mr Wilson. The provisions that govern a stay of execution are set out in CPR Part 83.7(4). That paragraph provides that:

”(4) If the court is satisfied that -

(a) there are special circumstances which render it inexpedient to enforce the judgment or order…then

…the court may stay the execution of the judgment or order…”

23. The special circumstances in the context of an adjudicator’s decision were helpfully gathered together by Coulson J (as he then was) in Wimbledon Construction Co (2000) Limited v Derek Vago, [2005] EWHC 1086 , albeit that that decision was made in the context of what was then RSC Order 47, but nothing turns on that. Quoting from the judgment of Coulson J, he said this:

”Those principles can be set out as follows:

(a) Adjudication (whether pursuant to the 1996 Act or the consequential amendments to the standard forms of building and engineering contracts) is designed to be a quick and inexpensive method of arriving at a temporary result in a construction dispute.

(b) In consequence, adjudicators’ decisions are intended to be enforced summarily and the claimant (being the successful party in the adjudication) should not generally be kept out of its money.

(c) In an application to stay the execution of summary judgment arising out of an Adjudicator’s decision, the Court must exercise its discretion under Order 47 with considerations a) and b) firmly in mind (…)

(d) The 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, may constitute special circumstances within the meaning of Order 47 rule 1(1)(a) rendering it appropriate to grant a stay (…)

(e) If the claimant is in insolvent liquidation, or there is no dispute on the evidence that the claimant is insolvent, then a stay of execution will usually be granted (…)

(f) Even if the evidence of the claimant’s present financial position suggested that it is probable that it would be unable to repay the judgment sum when it fell due, that would not usually justify the grant of a stay if:

(i) the claimant’s financial position is the same or similar to its financial position at the time that the relevant contract was made (…); or

(ii) The claimant’s financial position is due, either wholly, or in significant part, to the defendant’s failure to pay those sums which were awarded by the adjudicator (…)”

24. To these principles Fraser J has added what has been referred to as “a new principle (g)” and that principle is set out at para. 39 of Fraser J’s judgment in the Grosvenor London case at first instance. That paragraph describes the new principle in these terms:

”(g) If the evidence demonstrates that there is a real risk that any judgment would go unsatisfied by reason of the claimant organising its financial affairs with the purpose of dissipating or disposing of the adjudication sum so that it would not be available to be repaid, then this would also justify the grant of a stay.”

25. Mr Justice Fraser went on to make a number of further points in relation to this “new principle (g)”. In particular, he went on to explain at paras. 40.2, 40.3 and 40.4 of his judgment that:

”[40]2. Such a feature is only likely to arise in a very small number of cases, and in exceptional factual circumstances. This addition to the principles is not intended to re-open the whole issue of the basis upon which stays of execution will be ordered in adjudication enforcement cases, or to define a specific, exhaustive and closed set of circumstances that can constitute “special circumstances” in the terms of CPR Part 83.7(4). In the vast majority of cases, the existing principles in Wimbledon v Vago will suffice and recourse to principle (g) will be extremely rare.

[40]3. A high test will be applied as to whether the evidence does indeed reach the standard necessary for this principle to apply. I consider that in order to fall into this category the standard is broadly the same as that necessary to justify the grant of a Freezing Order (what used to be called Mareva relief).

[40]4 The addition of this further principle is not designed to prevent a claimant from dealing with the adjudication sum in the ordinary course of business, or make evidence of what a claimant may be intending to do in the future, in the ordinary course of business, relevant or admissible under this head. The whole purpose of adjudication decisions being summarily enforceable would be frustrated if all a winning party in an adjudication could do with any payment was to place it in an account, and not use it, to avoid the risk of a stay of execution being ordered. That is not the purpose of principle (g).”

26. It is absolutely clear from the authorities that in order for “principle (g)” to arise there must be evidence of a real risk that any judgment will go unsatisfied. In particular Fraser J made it clear that the test was a high one and akin to that required to justify the grant of a freezing order. He went on to say, at para. 61.2 of his judgment in Grosvenor London:

”Mere assertions will not be sufficient. Isolated discrepancies on statutory accounts will not be sufficient either.”

27. Lord Justice Coulson approved the requirement for the defendant to meet the standard of a freezing order when the case came before the Court of Appeal in December 2018. He also made clear what that test is, citing Gloster J (as she then was) in Holyoake & Anor v Candy & Ors. [2017] EWCA Civ 92. Going to the judgment of the Court of Appeal, the point is dealt with at para.41. In so far as is material what Gloster LJ said was this:

”41. There must be a real risk, judged objectively, that a future judgment would not be met because of unjustifiable dissipation of assets. But it is not every risk of a judgment being unsatisfied which can justify freezing order relief. Solid evidence will be required to support a conclusion that relief is justified, although precisely what this entails in any given case will necessarily vary according to the individual circumstances.”

28. That test has not begun to be met here. There is no evidence that NCL would seek to dissipate its assets or to organise its financial affairs with the purpose of dissipating or disposing of the adjudication sum so that it would not be available to be repaid should Mr Wilson ultimately succeed at trial. The fact that NCL is owned and operated by Mr Noble and that like any limited company it may be placed in creditors’ voluntary liquidation at any time is not evidence of there being a real risk of NCL organising itself so as to dissipate or dispose of the adjudication sum. The facts are nothing like those that pertained in the Grosvenor case in which there was evidence of threats having been made to wind up Grosvenor and real issues as to the financial viability of Grosvenor, and as to its statutory accounts that were not satisfactorily explained to the court. Nor have I seen sufficient evidence to support Mr Wilson’s assertion that NCL has consistently acted in a duplicitous manner; the fact that there may well be - and I make no finding in relation to it - all sorts of errors in the final account, for instance, does not translate into fraud. Mr Wilson disagrees with the evidence presented by NCL during the adjudication, but as I have already stated, it was open to the adjudicator to prefer certain aspects of that evidence to that of Mr and Mrs Wilson.

29. For the sake of completeness, I have also considered the other grounds on which a stay might be granted as set out by Coulson J in Wimbledon v Vago because counsel for the claimant addressed these matters in his skeleton argument. I have already set out the applicable principles above.

30. Mr Wilson has not established a probable inability on the part of NCL to repay the judgment sum at the end of any trial, and indeed Mr Wilson said, perfectly fairly, that he was not taking issue with the company’s finances but rather with how the company or those behind it might behave in the event that he was successful at trial.

31. I also note that NCL is clearly not insolvent. It is not in insolvent liquidation and, on the contrary, Mr Moore, whose firm is the accountant for NCL, has provided a witness statement in which he states that NCL’s balance sheet for the year ending 28 February 2019 will be significantly improved as against previous years and in which he states that on the financial evidence available to him, NCL is a healthy and robust business, and in a better financial position than it was in 2017 when the building contract the subject of this dispute was signed by Mr Wilson. There is no reason for the Court not to accept that evidence.

32. As regards the remainder of the points that were made by Mr Wilson in his defence document, the fact that Mr Wilson intends to issue proceedings to determine his dispute with NCL is not grounds for a stay. Similarly, Mr Wilson’s offer to provide security for the adjudication sum does not assist him. The whole point of the statutory adjudication scheme is that adjudicator’s awards should be paid and paid promptly. As counsel for NCL puts it, the scheme is based on the principle of “pay now and argue later”. The key purpose of the scheme is to safeguard the cash flow of the contractors. If a defendant could obtain a stay by offering security instead of payment, that would undermine the very purpose of the scheme. Accordingly, Mr Wilson’s offer does not provide a basis on which the court could exercise its discretion to grant a stay. Accordingly, applying the principles in Grosvenor London and in Wimbledon v Vago, I have no doubt that there are no special circumstances in this case such as would render it inexpedient to enforce the judgment or order. Accordingly, Mr Wilson’s application for a stay is dismissed.