NAP Anglia Ltd v Sun -Land Development Co Ltd [2011] EWHC 2846 (TCC)

[2011] EWHC 2846 (TCC)

Case No HT-11-342

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 03/11/2011

Before

MR JUSTICE EDWARDS-STUART

Between

NAP ANGLIA LTDClaimant

SUN-LAND DEVELOPMENT CO. LTDDefendant

Ms Alexandra Bodnar (instructed by Prettys Solicitors) for Claimant

Mr Thomas Worthen (instructed by Bennett Griffin LLP) for Defendant

Hearing Hearing dates: 27 October 2011

Judgment

Introduction

[1]This is an application by the Claimant (“NAP”) to enforce the decision of an adjudicator, Mr C J Hough, given on 7 August 2011. The unusual feature of the case is that the adjudication took place concurrently with a claim in the Norwich County Court in respect of the same dispute, namely the value of the NAP’s final account.

[2]By his Decision the adjudicator awarded the claimant £96,334.41, of which about a third represented interest. In addition, the adjudicator directed that "provided that payment to me has been made by NAP, the amount of my fees and expenses shall be paid by Sun-Land to NAP". He assessed these fees and expenses in the sum of £9,855.

[3]The Defendant (“Sun-Land”) challenges the Decision on the ground that the adjudicator did not observe the rules of natural justice. Alternatively, it contends that, if summary judgment were to be given for NAP, execution of that judgment should be stayed until the decision of the county court or on the ground that NAP’s financial position is such that it may not be able to repay the amount of the adjudicator's award if it is subsequently reversed by the county court.

The facts

[4]By a contract dated 1 August 2005, incorporating the terms of the CIOB Building Contract, December 2004 edition, NAP agreed to construct four houses and carry out ancillary works at a site in Griston, Norfolk, for the sum of £728,000. The Contract Administrator was Mr David Futter of David Futter Associates.

[5]Possession of the site was to be given on 20 June 2005 and the work was to be completed by 19 December 2005. The work was the subject of substantial delays. In March 2006 the contract was varied to include an additional four houses.

[6]On 14 November 2006 the Contract Administrator issued interim certificate 16, by which an amount of £105,810 was certified as due to NAP and, on NAP's case, was to be paid by 12 December 2006. Sun-Land did not pay and it did not issue a withholding notice. On 19 January 2007 NAP purported to terminate the contract for non-payment. Sun-Land's case is that interim certificate 16 was subsequently revised and reissued with the result that the final date for payment was not until 26 January 2007, after NAP had purported to terminate the contract. However, the adjudicator was not asked to determine the question of whether NAP's termination of the contract was valid.

[7]In the autumn of 2008 NAP started proceedings in the Norwich County Court for the sum that it claimed was due to it under its final account. Unfortunately, that claim has not moved swiftly. There was a trial in November 2010, but this was adjourned part heard after 5 days. There was a further three-day hearing in February 2011, when the case was again adjourned part heard with a view to being listed for a final hearing lasting three days. On 3 June 2011 the final three days were fixed to take place during 3-5 October 2011.

[8]By this stage NAP had begun to lose patience with the court proceedings and so, on 15 June 2011, it referred the dispute in relation to its final account to adjudication. Mr Hough was appointed the adjudicator.

[9]The timetable for the adjudication was as follows:(a) NAP issued its Referral Notice on 22 June 2011.

(b) Sun-Land was ordered to serve its Response by 13 July 2011.

(d) Sun-Land was given until 29 July 2011, 7 days, to respond to this.

(e) NAP was given until 1 August 2011, 3 days, to serve its final submission.

(f) The parties extended the adjudicator's time for issuing his Decision to 7 August 2011 (in place of 3 August 2011).

[10]Sun-Land did not pay. Indeed, NAP did not pay the adjudicator's fees either. On 25 August 2011 NAP started these proceedings seeking summary judgment to enforce the decision. On 29 September 2011 the three day hearing in the Norwich County Court fixed for 3 October 2011 was put back to 3 January 2012 (and then later put back again to 30 January 2012).

[11]After some 8-10 days of trial, I would not expect the judge in the Norwich County Court to be in a position to deliver an extempore judgment at the conclusion of the next hearing on 2 February 2012. In my view, therefore, it is unlikely that a judgment will be given in the county court much before March 2012 (assuming, of course, that the trial is concluded in February 2012).

The grounds on which Sun-Land resists the application

[12]Sun-Land contends that the timetable laid down by the adjudicator for the conduct of the adjudication unfairly and unjustifiably favoured NAP and therefore constituted a breach of the rules of natural justice. Further, in reaching his Decision it is said that the adjudicator ignored several substantial arguments raised by Sun-Land rendering the process unfair.

The timetable

[13]In relation to the timetable, Sun-Land submits that the timetable gave both the first and last word to NAP, and that NAP was given more time in each round of submissions than the time given to Sun-Land. For example, whilst NAP had had unlimited time to prepare its Referral Notice, Sun-Land had only 21 days within which to prepare and serve its Response. Whilst NAP was then given 9 days in which to respond to this submission, Sun-Land was only given 7 days within which to produce its next submission in response. Finally, NAP was given a further 3 days in which to serve the final submission in the referral.

[14]Mr Thomas Worthen, who appeared for Sun-Land, accepted that, since Sun-Land had asked for "at least 14 days" within which to serve its Response but had been given 21 days, it could make no complaint in relation to that 21 day period. His submissions were therefore focused on the final three exchanges in which, as he put it, the natural tactical advantage that the statute conferred on a referring party was enhanced by NAP being given more time and an extra submission. He submitted that this amounted to an unfair distribution of the amount of time available for making submissions.

[15]To assess the merits of these submissions it is necessary to look at the contemporaneous correspondence between the parties and between the parties and the adjudicator, to part of which Mr Worthen referred me. By an e-mail sent at 10:04 hours on 13 July 2011 Sun-Land's solicitors enclosed its Response, but not the supporting documents, which they said would be sent out by recorded delivery that evening.

[16]At 14:30 hours the following day, 14 July 2011, NAP's solicitors notified the adjudicator that they had not received any documents from Sun-Land's solicitors in that day's post. They pointed out also that the Response contained several new and/or amended arguments in respect of both Sun-Land's defence and its counterclaims. They said also, on the basis of reading the Response, that it was likely that they would be seeing some documents for the first time and that certain documents would probably be relied on that had not been relied on previously. They therefore asked for a right to reply and to be permitted to submit that response by Friday 22 July.

[17]On 18 July 2011 the adjudicator directed that NAP "may deliver a Reply limited to matters arising out of the Referral (sic - he must have meant the Response) on or by Friday 22nd of July, provided that it agrees to extend the time for my decision by 14 days. I am not minded to agree a piecemeal extensions (sic) as a consequence can be that a referring party may seek to use a partial extension to its tactical advantage."

[18]In these circumstances I cannot see any ground for criticising the adjudicator's approach so far. On Tuesday, 26 July 2011, Sun-Land's solicitor sent an e-mail to the adjudicator at 15:44 hours saying that his client had seen a copy of the reply from NAP and had instructed him to request a short period of time to prepare a final response document. The adjudicator replied a few minutes later asking when it was proposed that this submission would be with him.

[19]At 15:54 hours Sun-Land's solicitor replied in the following terms: “The e-mailed reply from NAP Anglia Limited arrived after I had left the office on Friday and so I was in receipt yesterday. I would be grateful for 7 days from receipt of that document, say 1 August."

[20]The adjudicator replied promptly at 15:59 hours saying that he could not allow the submission to be served on 1 August because his Decision was due on 3 August and he had no power to extend the time. He therefore directed that Sun-Land's submission had to be served by noon on Friday 29 July, with a final submission from NAP by noon on Monday, 1 August 2011.

[21]There was no evidence before the court as to when NAP served its submission on the afternoon/evening of Friday, 22 July 2011, but I was told that Sun-Land's solicitor left the office at about 5 pm without waiting for the submission from NAP or finding out when it was likely to arrive. In these circumstances, it seems to me that the adjudicator's directions in relation to the service of submissions were entirely fair and reasonable.

[22]Although, out of deference to the careful submissions of Mr Worthen, I have explored the circumstances in which the adjudicator's directions came to be issued in some detail, I do not consider that the timetable that I have set out in paragraph 9 above is unreasonable on its face. There is nothing unusual about giving the referring party the last word, or in having an odd number of submissions. After all, the standard procedure in any hearing is for the claimant to open his case, the respondent to make his submissions in response and for the claimant to have the last word by way of reply. It is only if fresh material is produced in the claimant's reply that the respondent is usually permitted to make any further submission.

[23]Accordingly, there is nothing in the point that the claimant, NAP, was permitted one more submission than Sun-Land. In addition, submissions should be shorter with each further exchange so that the time needed by a party to respond to the previous submission by the other party should be correspondingly less. In this regard, the adjudicator's directions seem to me to be quite unexceptional.

[24]I therefore regard the challenge to the adjudicator's timetable as being wholly without merit and I have no hesitation in rejecting it.

The alleged failure to address issues

[25]Sun-Land complains that the adjudicator did not properly appreciate or have regard to a number of the submissions made on its behalf. These fell broadly into four categories.

[26]The first complaint related to the methodology adopted by a quantity surveyor instructed by NAP, Mr Hale, when valuing Sun-Land's claim in respect of snagging items. The actual complaint was in the following terms, at paragraph 21(d) of the Response: “The valuation of snagging work carried out by Mr Hale . . . adopts an incorrect approach in a number of respects and cannot be relied upon (Sun-Land is currently in the process of obtaining an amended evaluation from Mr Hale based on the correct approach)." From this it can be seen that Sun-Land was not putting forward, and was not in a position to put forward, alternative figures to those originally arrived at by Mr Hale.

[27]Paragraph 21(d) of the response contained one of a number of points which were advanced under the heading "Section B4: NAP’s comments regarding negotiations and Court proceedings". The reference to Mr Hale appeared under this heading because he had prepared a valuation of the relevant items on the Contract Administrator's snagging list pursuant to an order of the County Court made on 11 February 2011.

[28]The adjudicator's decision in relation to this section was contained in paragraph 16 of his Decision. This was in the following terms:

"I do not regard the parties’ submissions regarding negotiations and Court proceedings to be of significant relevance to deciding the dispute. However, I have considered the submissions in deciding the relevance and application of the evidence of both Mr Hale and Mr Futter."

[29]So what the adjudicator was saying there, in my view in fairly clear terms, was that he had considered Sun-Land's submissions in which it criticised the approach adopted by Mr Hale. The use of the word "however" at the beginning of the second sentence makes it clear that he did not regard Sun-Land’s submissions about the evidence of Mr Hale and Mr Futter to be irrelevant - as he regarded the submissions about negotiations and court proceedings to be - and that he had considered them.

[30]The snagging items were addressed by Sun-Land in Section E of its Response. Here it repeated its criticisms set out at paragraph 21(d) and, on the basis of its submission that Mr Hale's report clearly undervalued the cost of the snagging work, proposed that the adjudicator should just double the amount of Mr Hale's valuation.

[31]The adjudicator dealt with the submissions in Section E in paragraph 47 of the Decision in the following terms: “NAP does not dispute, in this adjudication, Sun-Land's entitlement to a deduction of £9,195.22 in relation to this item and I allow that amount, subject to deduction of the sum of £6,079.14 included in the amount I have allowed under Section D1 above. I allow £3,116.08."

[32]Sun-Land criticises this on the ground that the adjudicator simply adopted the conclusions given by Mr Hale “without even acknowledging that Mr Hale's approach had been criticised" (Sun-Land's skeleton argument, paragraph 20(a)). In my view, this is not a fair comment. The adjudicator's conclusion at paragraph 47 has to be read with what he said earlier at paragraph 16 of his Decision. There he says in terms that he did consider Sun-Land's submissions in relation to the evidence of Mr Hale. In what was perhaps a revealing comment, Mr Worthen submitted that "we can't tell that the adjudicator has dealt with the point”. But question for the court on this application is not whether or not Sun-Land can “tell” what the adjudicator did, but whether or not the adjudicator answered the question that was referred to him.

[33]In my judgment, it is clear not only that the adjudicator addressed the question of the value of the snagging items but also that he had considered Sun-Land's criticisms of the approach adopted by Mr Hale. True it is that he did not set out his reasons for not accepting the criticisms made by Sun-Land, but he was not obliged to do so in a Decision which had to be prepared under a very tight timetable. Further, it is quite clear that Sun-Land had no positive case as to what the correct valuation of the snagging items should have been: to say that it is preparing a valuation and that, in the meantime, the adjudicator should just take an arbitrary figure by doubling Mr Hale's valuation, is a submission that has only to be made in order to be rejected. It is to be remembered that, according to the submissions before the adjudicator, Sun-Land had been in possession of Mr Hale's valuation since March 2011. It was not something bounced on it in the course of the adjudication.

[34]In my view, there is no merit in Sun-Land's submissions on this point and I reject them.

[35]The next three points in Mr Worthen's skeleton argument were taken together because they concerned the diminution in value of the properties as a result of defective work and the failure to register them with the NHBC. The adjudicator dealt with these submissions at paragraph 48 and 49 of his Decision in the following terms: “48. A claim for defective work can be based on cost of repair, diminution in value or loss of amenity. Sun-Land relies primarily on diminution in value, but has produced no persuasive evidence in this adjudication to support its claims. I therefore make no adjustment based on claimed diminution in value of the properties. 49. Again I am satisfied that it is appropriate to rely on the decisions and evidence of the Contract Administrator in establishing Sun-Land's entitlement in relation to the Schedule at SL TAB 32, particularly when evidence has been given in a court of law. Having considered that evidence as recorded in the Schedule, the submissions of both parties and on the basis of other evidence before me in this adjudication, I can see no reason why I should challenge Mr Futter's views. Neither party has produced compelling evidence for me to do so in circumstances where it is quite clear that there are significant gaps in the evidence presented to me. In this regard I am conscious that the burden of proving its counterclaims falls on Sun-Land."

[36]Sun-Land produced no evidence before the adjudicator as to the amount of the diminution in value of the houses as a result of the defects. It relied on a report by Sequence Land & New Homes ("SLNH"), the author of which was said to be still in the course of preparing valuations, which simply described one of the defects as having "a significant effect" and another as having an effect which was "clearly substantial". This provided no basis upon which a reasonable adjudicator could interfere with an assessment of diminution in value by the Contract Administrator, however ill qualified Sun-Land may say the latter was to make such an assessment. It seems to me that the adjudicator was perfectly entitled to reach the conclusion he did, namely that neither side had provided any persuasive or compelling evidence to justify him rejecting the valuations arrived at by the Contract Administrator.

[37]More fundamentally, Sun-Land cannot say that the adjudicator has not addressed the issue of diminution in value: he clearly did. Sun-Land's real complaint is that it considers that the adjudicator's conclusion was wrong because it should have been evident to him on the basis of SLNH’s report that the Contract Administrator had greatly undervalued the extent of the diminution in value. It is possible that in the litigation it may make this point good. However, it is trite law that an unsuccessful party to an adjudication cannot challenge the decision of the adjudicator in enforcement proceedings on the grounds that it was wrong. I therefore have no hesitation in rejecting Sun-Land's submissions under this head. In the context of these enforcement proceedings, they are wholly without merit.

[38]Sun-Land's next ground of challenge concerned NAP's claim for delay in the provision of mains water. Sun-Land made two points: first, that the contractual responsibility for this rested with NAP and, second, the extent of the actual delay in the provision of the mains water supply.

[39]There is no dispute that the adjudicator dealt with the issue of contractual responsibility, which he answered in favour of NAP. However, Sun-Land complains that the adjudicator did not address the disputed issue as to the extent of the delay. It was submitted that this was a substantial issue because it went both to NAP's claim for loss and expense and to Sun-Land's claim for liquidated damages.

[40]In the opening sentence of paragraph 14 of his Decision, the adjudicator said this: “In considering the parties’ submissions I have concluded that there is no reason to challenge the Contract Administrator’s assessment and award as set out in his letter to NAP dated 24 July 2007 and in relation to which I comment further below under Section G." The adjudicator then went on to say why he rejected Sun-Land's submissions that the contractual responsibility for the provision of mains water rested with NAP. It is true that, apart from his conclusion that I have quoted above, the adjudicator did not give any reasons for preferring the Contract Administrator's assessment of the appropriate extension of time to Sun-Land's criticisms of it. However, the issue for the adjudicator was whether or not the extension of time awarded by the Contract Administrator was correct and he decided this issue. Once again, Sun-Land's real complaint is that the adjudicator should not have reached the conclusion that he did.

[41]In my view, Sun-Land's challenge on this ground must fail also.

[42]The final ground relied on by Sun-Land concerns of the manner in which the adjudicator dealt with Sun-Land's submissions about the supply and fitting of kitchens. The supply and fitting of the kitchens was originally the subject of Prime Cost sums. The Contract Administrator gave an instruction to NAP to omit the Prime Cost sums and to place an order with the kitchen supplier "in-line with their quotation and planning proposals . . . for the Show House type ‘A’".

[43]Sun-Land contends that NAP did not order the kitchens in accordance with the supplier's quotation, but in fact ordered kitchens at an increased cost - the difference being £3,091. Sun-Land contends that NAP had no authority to do this. In addition, Sun-Land submits that there was an agreed price for fitting the kitchens in the original contract but that NAP has increased its fitting cost pro rata in line with the actual, and increased, price paid. Sun-Land submits that NAP's claim for the fitting costs should be limited to its original allowance. The amount in issue here is £1,660.87.

[44]As to the first point, at paragraph 28 of his Decision the adjudicator concluded that he was satisfied that goods and materials were supplied to NAP for the price claimed and that there was no evidence that the Contract Administrator considered the goods and materials to be contrary to his instruction. This, it seems to me, is a clear finding - right or wrong - that NAP had authority to order the materials that it did (or, at least, that there was a ratification of any want of authority) and that those materials were supplied at the price claimed by NAP. This disposes of Sun-Land's first point.

[45]I accept that the adjudicator did not address in terms the separate issue of the increase in fitting costs. However, he decided the issue of the sum that was due to NAP in respect of the supply and fitting of the kitchens by allowing NAP's claim for these items in full. So, whilst the adjudicator did not address Sun-Land's argument about the increase in the fitting costs expressly, he effectively decided it against Sun-Land by finding that NAP was entitled to the uplift claimed.

[46]Once again, Sun-Land's argument really amounts to an allegation that the adjudicator wrongly rejected its submissions. As I have said already, this is not an available ground on which to resist enforcement.

The authorities

[47]So far I have disposed of Sun-Land's grounds for resisting enforcement of the adjudicator's Decision without reference to any authority. I do not consider that reference to authority is required because, on my analysis, Sun-Land's complaints about the adjudicator's Decision can be put no higher than arguments to the effect that he reached the wrong conclusions on some of the questions before him. It has been said, time and again, that enforcement of an adjudicator's decision cannot be resisted on the ground that the decision itself was obviously wrong, and therefore unfair: see Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd

[2000] BLR 522

. Whilst I can see that it is possible that the judge in the county court proceedings may decide that some of the adjudicator's conclusions on these points were wrong, I would not be prepared to say, on the material before me, that any of the impugned decisions were wrong, let alone obviously wrong.

[48]But even if I am wrong in my analysis of Sun-Land's grounds, there is a fundamental difference between a failure to consider and address a substantive defence put forward by the responding party and a failure to address some particular aspect of the evidence or element of that party's submissions: see the discussion of the relevant authorities in Coulson on Construction Adjudication, 2nd edition, at paragraphs 13.32 - 13.35, with which I respectfully agree and adopt. Whilst the former might give rise to a breach of natural justice, the latter will not.

[49]Accordingly, there is nothing in the authorities that causes me to reconsider my conclusion that all the grounds advanced by Sun-Land are without merit. I conclude therefore, that NAP is entitled to summary judgment in respect of the adjudicator's decision that Sun-Land is to pay NAP forthwith the sum of £96,334.41. In these circumstances, I give judgment for NAP for £96,334.41, plus interest (to be assessed if not agreed).

[50]However, NAP also seeks summary judgment in respect of the adjudicator's determination that his fees should be paid by Sun-Land, provided that payment has first been made to him by NAP. It appears that NAP did not arrange for payment of the adjudicator's fees until the day before the hearing. It is not in dispute that it had not paid the adjudicator's fees at the time when it issued the claim form.

[51]In my view, this failure is fatal to NAP's claim in respect of the adjudicator's fees. Since its entitlement to claim those fees from Sun-Land was, by the terms of the adjudicator's Decision, contingent on it having paid those fees to the adjudicator, NAP had no cause of action against Sun-Land in respect of the adjudicator's fees at the time when it issued the claim form. I therefore refuse NAP’s application for summary judgment insofar as it concerns the adjudicator's fees of £9,855.

[52]I now turn to the question of a stay of execution of the judgment.

Whether or not enforcement of the judgment should be stayed

[53]It is clearly established by the decision of Dyson J (as he then was) in Herschel Engineering Ltd v Breen Property Ltd

[2000] BLR 272

, that a party to a construction contract may refer the dispute to adjudication even though the same dispute is the subject of current litigation. This is because there is a statutory right to refer a dispute to adjudication "at any time".

[54]However, Mr Worthen relied on one paragraph of Dyson J's judgment where he said this (at paragraph 21): “[Counsel for the unsuccessful party] points out that, if his first submission is wrong, it is possible to conceive of absurd situations arising. For example, he suggests that the hearing in the county court may be adjourned part heard for several weeks. The judge may have made adverse comment on the claimant's case. The claimant might decide to use the period of the adjournment to refer the dispute to adjudication in the hope of obtaining a favourable provisional decision from the adjudicator. As I said in the course of argument, if an extreme case of this kind were to occur and the claimant were to succeed before the adjudicator, the most likely outcome would be that the defendant would not comply with the adjudicator's decision. If the claimant then issued proceedings and sought summary judgment, the court would almost certainly exercise its discretion to stay execution of the judgment until a final decision was given in the county court proceedings. In any event, the fact that it is possible to conceive of far-fetched examples like this does not deflect from the view that I have already expressed."

[55]In order to consider the submission based on this paragraph, one needs to recall the facts of that case. The claimant had started proceedings in the county court seeking judgment for the amount of two invoices. It obtained judgment in default of defence. The defendant then made a successful application to have the judgment set aside and was given unconditional permission to defend. At the hearing of that application the question was raised of a possible reference by the claimant of the disputes to adjudication, and so the District Judge ordered a stay of proceedings for 28 days for this to be considered. 7 days later the claimant lodged an appeal against the decision setting aside the judgment in default and, at about the same time, referred the dispute to adjudication. The claimant received a decision from the adjudicator in its favour a few weeks later and whilst the appeal against the District Judge's decision was still pending.

[56]On 11 April 2000, Dyson J heard the claimant's application for summary judgment and the defendant’s application for a stay pending the determination of the county court proceedings. He said that, judging by the delays that had occurred to date, it was "possible, if not probable, that the trial will not take place until the early autumn". That would have been some 5 months away. He declined to order a stay.

[57]Against this background, it seems to me that the comments of Dyson J at paragraph 21 of his judgment that I have quoted above must have been made in contemplation of a situation where both(a) the judge in current litigation had made some adverse comment on the claimant's case (or there had been some similar development adverse to the claimant's case) and

(b) the litigation was likely to be concluded fairly soon after the date when the adjudicator would be likely to give his decision (I take this from Dyson J’s reference to an adjournment of several “weeks", as opposed to months). I consider that it was the presence of both of these elements that led Dyson J to refer to that example as "far-fetched", otherwise the mere fact that a dispute was referred to adjudication during the currency of litigation involving the same dispute, would often give rise to a successful application for a stay of execution of the adjudicator's decision.

[58]In my view, the situation in this case is not one that can be described as far-fetched. It has not been suggested that in the hearings so far in the County Court the judge has given any adverse indication about the merits of NAP’s case. It seems to me that judgment in the county court is probably at least 4 months away, and possibly more. In the light of this, I cannot see any material difference between the facts of this case and the facts of Herschel v Breen, where a stay was refused.

[59]However, Mr Worthen has another string to his bow. He submits that there is a real doubt as to whether NAP will be able to repay the amount of the judgment if it loses in the county court. This would be a good reason for imposing a stay on the enforcement of some, or all, of the judgment sum: see Wimbledon Construction Co 2000 Ltd v Derek Vago [2005] 101 Con LR 99 (TCC).

[60]The power to order a stay of execution is conferred by RSC Ord 47, which remains part of the Civil Procedure Rules by operation of Pt 50.

(a) which provides as follows:

'(1) Where a judgment is given or an order made for the payment by any person of money, and the Court is satisfied, on an application made at the time of the judgment, or order, or at any time thereafter, by the judgment debtor or other party liable to execution—(a) that there are special circumstances which render it inexpedient to enforce the judgment or order … the Court may by order stay the execution of the judgment or order … either absolutely or for such period and subject to such conditions as the Court thinks fit.'

[61]As Coulson J held in Wimbledon v Vago, there can be no doubt that the probable inability on the part of a claimant to repay a judgment sum is a special circumstance within the meaning of RSC Ord 47, r 1(1)(a). In that case Coulson J went on to consider the authorities on the grant of a stay in the context of an application to enforce an adjudicator’s decision, which he helpfully summarised, at 107, in the following terms:(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 Ord 47 with considerations (a) and (b) firmly in mind (see the AWG Construction case).

(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 Ord 47, r 1(1)(a) rendering it appropriate to grant a stay (see the Herschell Engineering case).

(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 the Bouygues and Rainford House cases).

(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 the Herschell Engineering case); 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 the Absolute Rentals case [2000] CILL 1637).

[62]Accordingly, in the context of this case the court must consider, first, whether or not NAP would be able to repay the judgment sum if the county court decides that NAP is not entitled to it and, second, the extent to which, if at all, NAP's present financial situation is the same or similar to its position at the time when the contract was made.

[63]In his skeleton argument Mr Worthen summarised the position as follows: “(a) The Claimant’s last filed accounts are exhibited to the 1st witness statement of Mark Diamond, the Defendant’s solicitor. They show that: i. On 31st January 2010, the Claimant’s overall financial position was that it had liabilities of £36,255. ii. The Claimant’s fixed assets were worth only £18,790. iii. The Claimant also previously had overall liabilities of £125,554 in January 2009, and £28,313 in January 2008. (b) This financial position contrasts with the position at the time the contract was made with the Claimant in 2005, when the accounts filed (which are attached to the second witness statement of Carolyn Porter) showed a positive balance of £196,915. This is not, therefore, a case where the Claimant’s financial position is no worse than when the Defendant chose to enter into the contract.” i. On 31st January 2010, the Claimant’s overall financial position was that it had liabilities of £36,255. ii. The Claimant’s fixed assets were worth only £18,790. iii. The Claimant also previously had overall liabilities of £125,554 in January 2009, and £28,313 in January 2008.

[64]Miss Alexandra Bodnar, who appeared for NAP, submits that NAP’s profit and loss accounts for the year ending 2010 show that NAP made a trading profit of £89,299.00 after tax and the only reason there is a figure of minus £36,355 is because of the off-setting of the deficit from 2009. Further, she says that NAP’s main liability is in the form of a director’s loan, which is described in NAP's accounts as an amount falling due after more than one year and there is no suggestion that it will be called in.

[65]In any event, she submits, in accordance with the principles set out in Wimbledon v Vago, the facts do not justify the imposition of the stay because:(i) NAP’s overall deficit of £36,255.00 is due wholly or in significant part to Sun-Land’s failure to pay the Adjudicator’s award. If Sun-Land had paid the sum due (£96,344.41 in respect of the final account claim), NAP would be significantly in credit, even taking into account the 2009 deficit.

(ii) NAP’s financial position is the same or similar to its financial position at the time it entered into the contract in 2005. NAP’s profit and loss account for the year ending 2005 shows a small profit of £51,240 after tax.

[66]Unfortunately, the evidence as to NAP's current financial position is not very satisfactory. The last set of accounts before the court is for the period ending 31 January 2010, so the figures are some 18 months out of date. In that year NAP made a profit after tax of almost £90,000 on a turnover of about £1.4 million. In the accounts for the year ending 31 January 2005 NAP is shown as having made a profit after tax of about £51,000 on a turnover of about £1.5 million. So, as a percentage of turnover, NAP's post-tax profit has almost doubled over those five years. However, that said, this has not been the result of steady improvement year on year because, in 2009, NAP made a trading loss of some £97,000.

[67]By contrast, as at 31 January 2005 NAP's net assets were about £197,000, whereas at 31 January 2010 it had net liabilities of about £36,000.

[68]I do not accept that NAP's current deficit of £36,255 as at 31 January 2010 is attributable to Sun-Land's failure to pay the sum awarded by the adjudicator, because his Decision was not made until August 2011. It may well be that some money is owed to NAP by Sun-Land in respect of this development, and that that sum should have been paid two or three years ago, but I am in no position to form a view as to Sun-Land's true liability to NAP (if any). Thus I am not in a position to make any finding as to the extent to which, if at all, NAP’s present financial position has been brought about by a default by Sun-Land.

[69]Sun-Land relies also on the fact that NAP failed to discharge the adjudicator's fees until the day before the hearing. It submits that this is consistent with NAP being in financial difficulty. I am not prepared to draw his inference: successful parties to adjudications are often directed to pay the adjudicator's fees as a pre-condition of recovering them from the other party and do not do so - often, I suspect, out of a simple reluctance to fund what is in truth a liability of the opposing party.

[70]On balance, I find it established that NAP is in a less healthy financial position now than it was in January 2005, before this contract was entered into. However, I do not consider that its present position is so bad that it would be unable to repay at least a significant proportion of the sum awarded by the adjudicator. It appears to be trading at a profit, even though it made a substantial trading loss in 2009, but as I have already said the information before the court is 18 months out of date. Since the burden of establishing NAP’s inability to repay the judgment sum is on Sun-Land, I do not find that it has established that NAP would be unable to repay any part of the judgment sum. However, on the assumption that any money received by NAP would be put into the business, rather than set on one side, I consider that there would be a real risk that it might not be able to repay in, say, March 2012, and then at short notice, a sum of the order of £100,000.

[71]Accordingly, I consider that a part of the judgment sum should be stayed. Doing the best I can I consider that NAP would probably be able to repay an amount of the order of £65,000. Therefore I direct that the execution of the judgment be stayed insofar as it exceeds £65,000.

[72]Accordingly, I direct that Sun-Land is to pay NAP £65,000 within 21 days. In the light of this, it seems to me that the assessment of interest is academic at this stage. I will deal with the question of costs by way of written submissions.

Afternote

[73]There have been two aspects of Sun-Land’s conduct of this application which have caused me considerable concern. First, there have been two examples where the witness statements prepared by the solicitor acting for Sun-Land, Mr Mark Diamond, have contained material inaccuracies. Second, behind Mr Diamond's third witness statement there have been inserted in the hearing bundle about 500 pages or more of unpaginated documents. These appear to be a mixture of specifications, architect’s instructions, schedules, valuations, estimates, quotations and correspondence.

[74]In his first witness statement made on 30 August 2011 Mr Diamond asserted that the adjudicator did not seek or obtain Sun-Land's agreement to extend the time for the adjudicator's decision to 7 August 2011. This was described as a procedural impropriety. This assertion was made in the face of a statement by the adjudicator in his Decision that both parties had agreed that the time for making his decision was extended to 7 August 2011.

[75]However, in an e-mail dated 2 August 2011 it was Mr Diamond himself who agreed on behalf of Sun-Land to extend the time for the decision to 7 August 2011. He repeated his denial that this extension of time had been given in his third witness statement made on 20 September 2011. It was not until 17 October 2011 that Mr Diamond realised that these assertions were wrong, when he sent an e-mail apologising to the adjudicator for the error. The reason given was that the electronic documents that he had on his system did "not tally with the paper documents I had on file". He then made a further statement on 20 October 2011 correcting the error in his previous witness statements.

[76]In my view, to make an error as fundamental as this is not acceptable. Since most of the exchanges between the adjudicator and the parties were by e-mail, I would have expected Mr Diamond to have checked his own e-mail account in order to make sure of the position before accusing the adjudicator of a procedural impropriety of this sort.

[77]Second, in a witness statement dated 21 October 2011 in support of an application to adjourn this hearing, the basis of which was to allow Sun-Land to prepare fully for the hearing, Mr Diamond said that both Sun-Land and NAP had had a very short notice of the hearing "and so they have had little time in which to prepare their respective cases". The point was also made that Sun-Land had only received that day the second witness statement of NAP's solicitor, and Mr Diamond then said "again, the Defendant will have little time in which to prepare any arguments against the points raised in that second witness statement".

[78]It is clear from the correspondence between the parties’ solicitors that Sun-Land and its legal advisers were aware of this hearing on at least 19 October 2011, if not before. Mr Worthen, who submitted a full and detailed skeleton argument for the hearing, had also settled Sun-Land's Response in the adjudication. He was clearly on top of the detail of the case and I cannot see any basis for the suggestion that Sun-Land could not prepare properly for the hearing before me. Indeed, Mr Worthen disclaimed at the outset any intention to apply for an adjournment.

[79]In these circumstances, I find it surprising, to say the least, that Mr Diamond was prepared to say in a witness statement dated 21 October 2011 that Sun-Land would have little time in which to prepare for the hearing on 27 October and to request an adjournment of that hearing in order to avoid any prejudice to his client. I should point out also that in the witness statement that he made on the previous day, there was no mention of any difficulty in preparing for the hearing on 27 October 2011.

[80]Solicitors are officers of the court and, in matters of this sort, judges expect to be able to rely on statements of fact made by solicitors in witness statements. Accordingly, solicitors are under an obligation to take reasonable care to ensure that any factual assertions made in their witness statements are correct, at least at the time when they are made. If they are found to be incorrect, they should be corrected at once.

[81]I turn now to the documents. As I have already said, the hearing bundle included about 500 pages of unpaginated documentation. It was not referred to in any of Mr Diamond's witness statements, so it was not clear to me what it was or why it was there. More importantly, a bundle of documents in this form is completely useless for use in court. There is no way that the court could readily find its way to any particular document in this bundle, unless it happened to be right at the beginning or the end. Indeed, when I expressed my concern to Mr Worthen at the outset of the hearing about this he was able to reassure me that he did not propose to take me to any documents in that part of the bundle. In these circumstances, one wonders what they were doing there.

[82]Not only is this an irresponsible waste of natural resources, but also it is likely to increase costs. Those advising NAP will doubtless have felt it necessary to look through these documents, albeit very briefly, in order to satisfy themselves that there is nothing there that they have not seen before. This just causes costs to increase for no useful purpose.

[83]But the basic message to practitioners in general is simple: to produce a bundle for use in court containing a large number of documents that are neither paginated internally nor paginated as part of the bundle is a complete waste of time and resources. It must not be allowed to happen.