Bewley Homes Plc v CNM Estates (Surbiton) Ltd [2010] EWHC 2619 (TCC)

Case No HT-10-309[2010] EWHC 2619 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 21 st October 2010
Before
MR JUSTICE AKENHEAD
Between
BEWLEY HOMES PLCClaimantCNM ESTATES (SURBITON) LIMITEDDefendant
Marc Rowlands (instructed by Fenwick Elliott) for ClaimantDominique Rawley (instructed by Haldanes) for DefendantHearing Hearing dates: 15 October 2010
JUDGMENT

Introduction

[1]The Claimant contractor, Bewley Homes Plc (“Bewley”), seeks summary judgement in respect of the sum of £474,522.90 plus interest said to be due under a Settlement Agreement dated 18 February 2009 between it and its employer, CNM Estates (Surbiton) Ltd (“CNM”). Issues arise between the parties as to whether that Agreement was varied or whether the parties proceeded on the basis that it was varied and otherwise and, if there is to be judgement against CNM, whether it should be stayed on the grounds either of the alleged insolvency of Bewley or of CNM. The Background[2]CNM is incorporated in the British Virgin Islands and, I was told, (although I make no finding) that a Mr Gale was the only or one of a number of shareholders. CNM wished to develop a site at the Old Post Office, 38 Victoria Road, Surbiton for residential and retail accommodation. By a building contract made in about June 2006, Bewley was engaged by CNM (albeit through a novation) to provide design services and to construct 65 residential units, 7665 ft.² of retail space and a 51 space car park together with external works at the site. The contract was in the JCT Standard Form of Building Contract with Contractor’s Design 1998 Edition incorporating various amendments. So far as I can ascertain, Practical Completion of the Works had occurred by October 2008.[3]It seems to be the case that much if not all of the funding for this development was provided by Investec Bank plc (“Investec”) who had charges over the property.[4]A dispute arose between the parties in relation to what were said to be unpaid sums totalling £245,858.94 and the sum of £1,445,916.61 in respect of an Interim Application for Payment No. 28. This was referred to adjudication in December 2008, with Mr Mark Entwistle being appointed as adjudicator. Following the exchange of submissions and evidence, the adjudicator produced a detailed and reasoned decision on 18 February 2009 by which he declared that Bewley was entitled to payment of £464,459.75 plus interest in the sum of £10,063.15; he also ordered CNM to pay his charges. Although the issue of defects was raised in the adjudication, the adjudicator was of the view that for various procedural and other reasons he could not deal with them. There was another related dispute involving a performance bond issued by Bewley’s bank, National Westminster Bank, in relation to the Building Contract which had involved the institution of proceedings by Bewley against CNM Estates Ltd and the bank in the Technology and Construction Court.[5]The parties entered into a Confidential Settlement Agreement (“Settlement Agreement”) which sought to resolve the outstanding issues between them. Relevant terms were as follows:
“1. Definitions Adjudication means an adjudication commenced by Bewley against CNM…before…Mark Entwistle Agreed Defects means the items listed in the Agreed Defects List [Annex 1] Apartment means Flat 26 of the Development… Development means the buildings and associated works constructed by Bewley under the Building Contract; Dispute means all or any disputes, demands, causes of action, obligations and liabilities asserted by any party hereto in the Adjudication Documents and in the Court Documents and for the avoidance of doubt includes any and all disputes, claims, demands, causes of action, obligations and liabilities asserted to date by CNM against Bewley in relation to defects in the Development; Latent Defect means any defect in the Development which is not apparent and which would not be detectable upon reasonable visual inspection as at the date of this Agreement…” 4.1 Without admission of liability, Bewley shall within 6 months of the date of completion of the Transfer or the date of payment of the sum referred to in clause 5.8.2…make good the Agreed Defects identified in the Agreed Defects List at no cost to CNM…in the manner as provided below. 4.2 …When Bewley consider that the Agreed Defects have been made good then Bewley shall notify CNM…in writing to that effect…If the Parties decide that the Agreed Defects have been made good, then the Date of Completion of Making Good the Agreed Defects shall be the date of the aforesaid notice in writing from Bewley to CNM…[ Provision was also made for what was to happen if there was disagreement] 5.1 CNM shall grant to Bewley the Lease of the Apartment (the "Transfer")… 5.3 CNM…shall grant the Lease with full title guarantee and with vacant possession… and free from incumbrances… 5.5 CNM…and Bewley agree that completion shall take place within 30 days of the date of this Agreement. 5.7 CNM…will either before or on completion of the Lease deliver to Bewley’s solicitors a letter of consent from Investec…consenting to the grant of the Lease free from all obligations pursuant to the charge of Investec…The Transfer shall be conditional upon CNM…obtaining such consent. 5.8 If Investec…do not provide the consent… 5.8.1 CNM… agree that the Transfer will not take place; and 5.8.2 CNM…shall pay forthwith to Bewley the sum of £474,522.90 plus interest at the daily rate of £69.42 from 18 February 2009 until the date of payment, without any or any purported set off, deduction, withholding or abatement whatsoever… 6.1 Save as provided for in clauses 5.8 and 7: 6.1.1 the Final Account under the Building Contract is agreed at the sum now paid to Bewley; and 6.1.2 Bewley acknowledges that it has been fully paid under the Building Contract inclusive of VAT, and is not entitled to any further payment. 9.1 This Agreement shall be in full and final settlement of [CNM’s] liability to pay Bewley pursuant to the Adjudication Decision… dated 18 February 2009. 11.1 In consideration of the release and discharge of the Bond, as referred to in clause 3, the making good of the Agreed Defects as referred to in clause 4, and the provisions concerning Transfer, as referred to in clause 5, the parties mutually agree to fully and finally settle the Dispute… 11.2 For the avoidance of doubt, nothing in this agreement shall prevent CNM…from commencing or asserting any claim, demand, or adjudication or legal proceedings under or in connection with the Building Contract in relation to any Latent Defect. 14.2 This agreement shall not be altered, modified or otherwise amended in any respect except in writing duly signed by all the parties." Adjudication means an adjudication commenced by Bewley against CNM…before…Mark Entwistle Agreed Defects means the items listed in the Agreed Defects List [Annex 1] Apartment means Flat 26 of the Development… Development means the buildings and associated works constructed by Bewley under the Building Contract; Dispute means all or any disputes, demands, causes of action, obligations and liabilities asserted by any party hereto in the Adjudication Documents and in the Court Documents and for the avoidance of doubt includes any and all disputes, claims, demands, causes of action, obligations and liabilities asserted to date by CNM against Bewley in relation to defects in the Development; Latent Defect means any defect in the Development which is not apparent and which would not be detectable upon reasonable visual inspection as at the date of this Agreement…”
[6]In broad terms, therefore, the parties agreed that CNM would either transfer Flat 26 to Bewley or, failing completion of that transfer by the end of March 2009, pay the sum of £474,522.90 plus interest Thereafter within six months Bewley was to make good the Agreed Defects, which comprised 10 somewhat generally described defects or areas of defects or incomplete work such as "Defective flat roofs (single layer membrane type)" or "Completion of the site boundary treatment".[7]It became clear as March 2009 went on that it would not be possible for the Transfer to take place as the Settlement Agreement envisaged. This was largely because Investec was reluctant to transfer the Flat, over which it had a charge, free from encumbrances and its charge without the clearest commitment to Investec from Bewley in relation to the Defects. This led to some discussions between Bewley’s Mr Fitzpatrick and Mr Carlisle of Investec; it has not been suggested that the latter was acting in some way as an express or implied agent of CNM. Mr Carlisle summarised in an e-mail of 31 March 2009 a telephone conversation which he had had with Mr Fitzpatrick:
“Bewley are unwilling to go back on to the site without the ownership of Flat 26 being transferred to Bewley… Investec are willing to enter into a legally binding agreement that upon sign off by the Bank’s appointed QS that the works have been completed to our satisfaction, Investec will undertake to transfer the ownership of Flat 26 to Bewley. However, Bewley are not willing to accept this due to the perceived risk of Investec… failing… Bewley have a legally binding agreement, that allows for the transfer of Flat 26. However as we pointed out, the flat is mortgaged to Investec and as such CNM do not have the authority to transfer the ownership of any flat without Investec’s approval. You mentioned that if the flat is not transferred then ultimately you will try and recover the money owed via the [adjudication]…if you try and enforce your judgement, we would strongly argue that if successful, then you would most likely receive no cash and certainly we would not transfer the ownership of the flat… The best solution may well be for the transfer of ownership to be transferred now, but with Investec retaining a first legal mortgage over flat 26 until such time as the works are completed, however we will not be able to provide any additional "sweetener", you mentioned a figure of £100,000 but this is not something we could agree to…”
[8]The response from Mr Fitzpatrick several hours later and following a telephone conversation was as follows: “… I would confirm the following points:(i) Once flat 26 has been transferred then Bewley will return to site to undertake rectification of defects.(ii) Bewley will only rectify those defects identified in the Agreed Defects list attached to the settlement agreement with the CNM.(iii) Once the defects identified in the Agreed Defects list have been rectified then Investec will release its charge over Flat 26.(iv) A mechanism must be put in place for the rectification and defects, its timescale and agreement that these works have been completed-similar to that in the settlement agreement.(v) Latent defects will not in any way affect the release of the charge.(vi) Bewley preserves its position under the settlement agreement… (viii) Any rectification works would be dealt with by your appointed surveyors and we would liaise with no other party. I think we will need to sign a new agreement with Investec and CNM… will have to sign up to it to given that they will be actually transferring the flat, they are the employer under the contract and also because what is being agreed changes what was agreed under the settlement agreement. Subject to your agreement to this I believe we could move to a swift legal agreement and commence works on site. The lawyers acting for us will be: Fenwick Elliott…[9]History and the evidence does not relate what happened precisely over the next two or three months but by about June 2009 a draft Supplemental Agreement had been prepared. This was to be entered into between Bewley, Investec, CNM and its associated English company. The draft preambles records the facts of the Building Contract and the Settlement Agreement and that Investec had "refused to give unconditional consent to release its charge over the Apartment”. The old Clauses 4.1 to 4.8 and 5.1 to 5.8 were to be deleted and replaced with new clauses. There were substantial amendments proposed which removed references to full and final settlement; for instance the old Clause 11.1 would be altered.. Bewley undertook to make good the Agreed Defects as per a List "attached as Annex A”; no draft Annex A was provided. Broadly the work was to be done so as to satisfy Investec’s representative. By Clause 5, CNM was to grant Bewley the Lease of Flat 26 which was to be in the form as contained in Annex B (no such draft being provided). On the grant of this Lease, Bewley was to give Investec a legal charge over the Lease which was not to be released until after the Date of Completion of Making Good of the Agreed Defects.[10]There is little evidence as to what happened so far as this draft is concerned but suffice it to say that none of the proposed parties took the matter very much further. There was a falling out because Investec’s representative produced a specification to which Bewley objected as going further than was necessary to put right the original Agreed Defects. Correspondence was exchanged. Bewley’s solicitors wrote on 8 December 2009 to CNM calling for payment of the sum payable under the Settlement Agreement given no transfer of Flat 26 had taken place. The response on 16 December 2009 from an entity called Newhaven (which was apparently asked by CNM to reply) suggested that CNM had discharged its obligations under Clause 3.1 to secure release of the bond but then said:
“We understand that your clients have met with Investec and their solicitors and Surveyors on more than one occasion to try to resolve this proposed agreement and that negotiations are well advanced in this regard with only an agreement to be finalised as to the exact scope and detail of the remedial/repair works to be undertaken by your Clients…”
[11]Nothing of any material importance seems to have happened until 27 July 2010 when Bewley’s solicitors wrote to CNM, threatening proceedings within 7 days:
“…regardless of any negotiations between Investec and our client, the fact remains that neither the Transfer nor payment has taken place in accordance with the Settlement Agreement. Accordingly, CNM…is in breach of the Settlement Agreement and our client is now entitled to receive payment of the sum of £474,522.90 plus interest.”
[12]There having been no response, Bewley issued proceedings in this Court, which were served on CNM in the British Virgin Islands. By 6 September 2010, CNM had instructed English solicitors in these proceedings. On 10 September 2010, Bewley issued an application for summary judgement. In a letter dated 14 September 2010, CNM’s solicitors wrote:
“…The fact is that your clients chose to negotiate with the financier of the project, Investec… and therefore did not seek to pursue the enforcement of the Settlement Agreement for some 18 months. It is also the case that the negotiations broke down because of your client’s dilatory attitude towards rectifying the admitted defects in the development which resulted in Investec putting the remedial measures out to tender…”
The Evidence and Issues on the Summary Judgement Application[13]The primary issue is whether there was some agreement whereby the Settlement Agreement was varied so that there was to be a wholly different agreement in relation to the Transfer of Flat 26 whereby in effect it was to remain charged to Investec unless and until all the Agreed Defects were put right by Bewley to Investec’s satisfaction. It is accepted for the purposes of this application that there is a reasonably arguable case that, if defects can give rise to set-off at this stage, there are defects in the work done by Bewley for which they could have a liability under the original Building Contract and that the cost of having others do the requisite remedial works exceed the sum claimed by Bewley.[14]Until some evidence was lodged by CNM very late and on the evening before the hearing, there was no hint or suggestion that it was seeking to suggest that there was any material (or indeed any) variation of the terms of the Settlement Agreement. However, that arrived in the form of a witness statement from Mr Carlisle of Investec and a second statement from Mr Miles of CNM’s solicitors. Indeed, there was no obvious sign of there being any defence prior to Mr Miles’ first statement which was served in time.[15]Mr Miles’ first statement dated 8 October 2010 was based on what he had been told by Mr Gale. He advanced defences and some evidence to support them which, properly, are no longer maintained such as a straight set-off for the cost of putting right the Agreed Defects (Paragraph 3(1)-(5)) and the impecuniosity of CNM and its inability to pay any judgement. There is an assertion which he puts forward at Paragraph 3(11) that Investec would have given consent to the Transfer but wished to retain its charge over the flat until rectification works were completed; It was suggested that Bewley had “indicated its unwillingness to carry out the Agreed Defect rectification adequately or at all” and that this was a breach of the Settlement Agreement which led to Investec being unwilling to “give away Flat 26 and be left unprotected against [Bewley’s] refusal to perform the defect repair works properly or at all”. It was said that Bewley should not be allowed to benefit from its own breach. He described the discussions that had occurred between Investec and Bewley and expressly said that these negotiations “did not result in an agreement” (Paragraph 19) ; this was said to have been because Bewley “would not commit to remedying the full extent of the defects identified by Investec’s Building Surveyors”. Bewley was said to have broken “off negotiations with Investec intended to resolve this issue in March of this year and declined to resume further contact with Investec”.[16]Mr Fitzpatrick responded to this in his statement of 12 October 2010. He referred to the fact that it is not suggested that any of the defects put forward by CNM are latent defects as described in the Settlement Agreement. He explained that Bewley has never been unwilling to put right the Agreed Defects but asserted that it has no obligation to do so until after the Transfer has occurred or the payment in lieu been made. He said (Paragraph 19), and it is not challenged, that at the time that he signed the Settlement Agreement he was assured by a Mr Samady, a CNM director, that CNM would procure the release of the Investec charge over Flat 26. He denies that the scope of defects rectification was widened by any agreement between Investec and Bewley. He said (Paragraph 23) that the negotiations with Investec foundered in mid to late 2009 because Investec would not agree to the charge being limited to the value of the flat and because Investec wanted Bewley to deal with further defects beyond the Agreed Defects.[17]Mr Carlisle’s late statement is short but confirms that Paragraphs 3(11), 18 and 19 of Mr Miles’ first statement, which had suggested that no agreement was reached on any supplementary agreement as between Investec and Bewley, are correct. He goes on to say that Investec remained willing to carry out the terms of the draft Supplemental Agreement and continued to negotiate with Bewley until May 2010 as to the work to be carried out by Bewley but it was only after this ceased that Investec sought tenders from other contractors.[18]Mr Miles’ second statement does not indicate from whom if anyone within CNM he obtained the information in it although he believes the contents to be true. He says (Paragraph 8) that he is “instructed by Mr Carlisle that the negotiations between [Bewley] and Investec culminated in a Supplemental Agreement”. He confirms that it was not executed (Paragraph 11), minor matters remained to be finalised but that the parties had agreed the main changes (Paragraph 12). He accepts that the “scope of the defects to be rectified was an issue” (Paragraph 14). He refers to the fact that Investec’s surveyors had produced a detailed specification of the works said to be necessary but that Bewley were unwilling to carry out some of the works set out in it; he says (Paragraph 16) that “it would appear that the defects that [Bewley] did not want to perform were directly related to the Agreed Defects List in the Settlement Agreement”.[19]There was objection by Bewley’s Counsel to the late introduction of these statements but I permitted them in as Bewley did not want an adjournment to deal with them and felt that it could easily defeat the points raised. Discussion on whether there should be judgement[20]The criteria for determining if there is to be judgement on a summary judgement are that the defendant must have no real prospect of successfully defending the claim and there should be no other compelling reason why the claim should be disposed of at a trial.[21]The material background to the Settlement Agreement was the Building Contract, its performance up to that date, the dispute or disputes which had arisen, the presence as funder and mortgagee of Investec and the adjudication. Obviously, the parties knew that CNM was complaining about defects and wanted Bewley to remedy them or otherwise pay for them to be remedied; they knew that Investec had a charge over the whole of the premises which had been developed. However, they knew that Bewley had obtained an adjudication decision against CNM; the ramification of that was that they must have known that, all thing s being equal, CNM would have had to pay the sum decided by the adjudicator as due very promptly and without set-off.[22]There can be little argument, and indeed Ms Rawley for CNM did not press any argument to the contrary, that the Settlement Agreement properly construed required:(a) First, CNM was to transfer to Bewley within a month Flat 26 free of encumbrances in general and Investec’s charge in particular over Flat 26. CNM was to procure from Investec, as between CNM and Bewley, a letter of release in effect of its charge over Flat 26.(b) Failing that, CNM was to pay £474,522.90 plus interest from the time of the adjudication decision. That sum was to be paid without “set off, deduction, withholding or abatement whatsoever”. The words are explicit and clear.(c) It was only after either the completion of the Transfer and the lifting of the charge over Flat 26 or payment that Bewley was to embark on the execution or completion within 6 months of the Agreed Defects.[23]It follows from this that the parties proceeded on a basis of CNM paying out and having the requisite remedial works carried out by Bewley later. CNM knew and must be taken to know that it was entitled to no security from Bewley as Bewley was being released from its obligation to maintain a performance bond under the Building Contract and no other security was to be provided.[24]In effect, subject to any argument about the possible variation of the Settlement Agreement, there could be no defence to the claim by Bewley. It can not be an arguable defence that CNM can maintain a set off in respect of its defects claim in circumstances in which it had agreed to pay without set-off.[25]The evidence about there being some material variation of the Settlement Agreement is vestigial and at its highest totally contradicted by the various strands of evidence adduced by CNM in these proceedings:(a) There is no evidence at all before the Court that CNM was materially (if at all) involved in the negotiations between Bewley and Investec. Neither Mr Miles nor Mr Carlisle says that it was. There is no evidence that CNM agreed to the contents of the incomplete draft Supplemental Agreement. It is not enough to argue that it would not have objected or would have agreed if asked. All that Ms Rawley could say on oral instructions during the hearing was that Mr Gale would say that there was such agreement. After the indulgence of being permitted to put in very late witness statements, I decline to accept this post 12th hour assertion; it is simply unfair that CNM can be permitted to plug an un-fillable gap by this type of late unaccredited information, particularly when that which is asserted is contradicted by the written evidence put in by CNM.(b) In any event, the suggestion that there was some sort of concluded tri-partite variation agreement is completely undermined by CNM’s own evidence that no agreement was achieved and that the negotiations broke down. It does not matter whose fault it was, if anyone’s, as to why they broke down or that there was provisional agreement on many of the matters which would, otherwise, have formed part of a variation agreement. The emails of 31 March 2009 make it clear that CNM would need to be involved and indeed that a new agreement would need to be signed. That reflects Clause 14.2 of the Settlement Agreement. There is no suggestion that this requirement was waived or abandoned by Bewley. No variation was ever signed by Bewley or CNM. There remained even in the draft Supplemental Agreement much to be filled in and decided upon.(c) There is no evidence that the parties proceeded upon the basis that the Settlement Agreement had been varied. To the contrary indeed, given the continuing negotiations and the facts that no remedial works were done and that it was Investec who secured a tender for the remedial works by other contractors, it was clear that they were not so proceeding. There is therefore no room for some sort of estoppel by convention argument.(d) The continuing disagreement between Investec and Bewley as to the scope of the necessary remedial work to put right the Agreed Defects was in law and in practice an effective reason why there could be no concluded agreement. It is not enough to assert that the detailed specification produced by Investec simply contained only what was necessary to put right the list of Agreed Defects contained in the Settlement Agreement. No party was willing to sign up to the Supplemental Agreement at least until there was agreement on this specification. There was no such agreement.[26]It is finally said that there are other compelling reasons why the claim should be disposed of at a trial, even if there is no viable defence. It is said that it is very unfair that Bewley should be paid first when there is a wholly arguable cross-claim which will, it is argued, overtop Bewley’s entitlement under the Settlement Agreement. That can not be a compelling reason in circumstances in which the parties expressly agreed that Bewley should be paid first without any security being provided against it not remedying the Agreed Defects. In general, a contractual party should not be permitted to secure a commercial advantage which it had expressly agreed with the other party that it should not have. I also bear in mind that but for the Settlement Agreement Bewley would on well-established authority have been able to secure by judgement enforcement of the adjudicator’s decision and payment, without set-off, of the very sum which it then also agreed under the Settlement Agreement to be paid without set-off. One also needs to remember that Bewley gave up certain rights under the Settlement Agreement such as the right to pursue its final account claims (see Clause 6.1). Another factor is that CNM does not strictly have any rights to pursue its cross-claims for Agreed Defects yet because under the Settlement Agreement, it is only after payment by CNM that Bewley’s obligation to put right the Agreed Defects arises; until payment, Bewley can not begin to be in breach and indeed it has 6 months to do the work. Looked at in the round, the Court should be slow to unravel a clear agreement between commercial parties by permitting a party to secure a commercial advantage which it had agreed to give up.[27]The final ground of seeking a trial which would permit CNM to avoid or defer paying Bewley the sum due to it under the Settlement Agreement is the possibility that based on its 2008/9 accounts it may not be able to repay any sums due to CNM if and when CNM has an actionable claim for a failure to put right all or some of the Agreed Defects. This seems to be a bad point because Bewley was in the same financial difficulties, if any, at the time when the Settlement Agreement was entered into (February 2009). If CNM chose to enter into the Settlement Agreement at a time when Bewley was in the same financial state as these accounts are said to demonstrate or if it did not bother to find out about Bewley’s financial position, it was taking the very commercial risk by entering the Settlement Agreement which it now seeks to avoid. That can not be right. I deal with Bewley’s current financial position below.[28]Subject to the question of a stay of execution, there should be summary judgement for Bewley in the sums claimed. Stay of Execution[29]RSC Order 47 permits the Court to grant a stay of execution on any court judgement if “there are special circumstances which render it in expedient to enforce the judgement” or the applicant for the stay “is unable from any cause to pay the money” due under the judgement. In effect, CNM seeks a stay because, it says, it is unable to pay the judgement sum and because Bewley could not repay the sum to be paid to it pursuant to the judgement if thereafter it fails to put right all the Agreed Defects and CNM pursues proceedings against Bewley.[30]I remain wholly unsatisfied on the evidence that Bewley would refuse or fail to put right the Agreed Defects; its obligation to put them right only arises after payment by CNM which by all counts CNM will do all it can to avoid making; it says that it can not pay. Bewley has put in evidence of its 2009/2010 financial position which is very much better than its position as indicated in its 2008/9 accounts and there is evidence that its funders will stand behind it. It is true that the 2008/2009 accounts point to a reduction in turnover from about £51 million to just under £18 million and an operating loss of just over £2 million with an overall loss of some £2.4 million; the balance sheets shows net liabilities of some £22.4 million. The latest accounts show an increase in turnover to £29.5 million and a profit for the year of £5.9m. The balance sheet shows net liabilities of £6.5 million. It is clear that the debenture loans have been reduced from £49 million in 2008/2009 to nil (see Note 13). Whilst there is no certainty in the future given the current economic and fiscal conditions, the recent history of Bewley does not suggest that it will probably fail; these latest accounts do suggest that Bewley will be able to meet its current obligations as they fall due over the next 12 months and that is supported not only from the accounts themselves but also from the various letters of support from its various long term shareholders and debenture providers.[31]In Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC 1086 (TCC), HHJ Coulson QC (as he then was) was dealing with a stay of execution of an adjudication decision although he set out the generally applicable principles in relation to that type of case. The principles shed some light on the current type of case but are not directly applicable because unlike here, an adjudication decision is not final as between the parties; it is only temporarily binding and litigation or arbitration, as the case may be, will finally resolve the dispute. Here, the parties have entered into a final Settlement Agreement (albeit after an adjudication) which does not produce some holding temporary position. That said, those principles were set out at Paragraph 26:
“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 (see AWG). 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 (see Herschell). 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 (see Bouygues and Rainford House). 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 (see Herschell); 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 (see Absolute Rentals).”
[32]As is obvious, much of this and all the case references relate to the practice of a stay of execution on an adjudication enforcement judgement for money. By analogy however to the current case, it is not obvious or clear, having regard to sub-paragraph (d) that there is an obvious inability to repay any judgement sum, as such; the highest that it can be put is that there may be an inability on the part of Bewley to honour a future judgement against it if and to the extent that it is established, following the payment of the sums due under the Settlement Agreement, that Bewley has not put right in whole or in part the Agreed Defects. Secondly, the proviso raised by the judge at sub-paragraph (f)(i) comes into play because Bewley’s financial position is no worse than it was at that time that the Settlement Agreement was entered into.[33]It is then suggested that the Court can exercise its discretion under RSC Order 47 to stay execution where, in this case, CNM can not pay. In commercial cases, such as this, it must be rare and exceptional for the Court to stay execution of a judgement sum because the defendant can not pay. If it was at all common, impecunious defendants, who defaulted on their payment obligations, could always avoid having to pay through the exercise of this discretion and defendants would never go into liquidation. No authority has been put forward to suggest that in a case such as the present one the Court should exercise its discretion. For the same reasons as given above, the Court should be slow by use of a stay of execution discretion to prevent the execution of a legitimate money judgement which it has been decided should be given in circumstances such as the present; it would be wrong for CNM to obtain by way of a stay the very right which it gave away through the Settlement Agreement.[34]In any event, the evidence put forward by CNM is inadequate in my view to support the assertion. No trading, management or other financial accounts are put forward by CNM; it is no answer to that complaint to say that it is not necessary in the British Virgin Islands for such accounts to be lodged because there must be overall accounting evidence as to what the true financial position overall of CNM actually is. For instance, it may be that CNM owns assets other than the two developments in Surbiton which it has. Mr Miles in his first statement says that CNM has two "main assets” which is a somewhat oblique statement because it implies that there are other assets. He says that Surbiton Phase 1 is valued at £7.5 million but Investec is owed some £9 million; something called "Park Works” is said to be worth £1.2 million and Investec is owed £2.8 million. Phase II is subject to a secondary charge to the Bank of Scotland which has appointed a receiver; Phase II is valued at £1.27 million but the Bank is owed more than £4.1 million. Investec is said to have a charge over the rents and profits of the development. There is no evidence that the valuations are supported by independent valuation; there is no evidence about what the rents and profits are. There is no evidence that it would be in Investec’s interest, if CNM has to pay Bewley, to allow CNM to be wound up or placed into receivership. Even if therefore this was the case in which the Court should consider a stay of execution on the grounds of the difficult financial position of CNM, it has not produced sufficient evidence to show the full financial picture such as would justify such a stay. Decision[35]As orally indicated to the parties at the conclusion of the argument, there will be judgement in favour of the Claimant, Bewley, in the sums claimed. There will be no stay of execution. I also dealt with the summary assessment of costs in favour of Bewley and it is unnecessary to set out the reasons for reaching the assessment which I did (unless the parties expressly request me to do so).

Cited in 3 later judgments