‘.1 the amount of expenses properly incurred by the Employer, including those incurred pursuant to clause 6.7.1 and, where applicable, clause 6.5.2.3, and of any direct loss and/or damage caused to the Employer and for which the Contract is liable, whether arising as a result of the termination or otherwise; .2 the amount of payments made to the Contractor; and .3 the total amount which would have been payable for the Works in accordance with this Contract.’
“To mitigate the above perceived theoretical risk to your Client (that it may consider the insolvency of Meadowside to effectively make enforcement proceedings futile), and as a condition of securing the ability to summarily enforce the Adjudicator’s Award, Pythagoras Capital Limited will guarantee any liability (which we see as unlikely) Meadowside might incur to you if unsuccessful in the enforcement proceedings or if you choose to overturn the Adjudicator’s decision by issuing proceedings, Pythagoras Capital Limited undertakes to guarantee the Claimant on the basis that: to the extent that your Client issues proceedings within 6 months of Meadowside’s successful summary enforcement and, having done so, successfully overturns the Adjudicator’s Award, Pythagoras Capital Limited guarantees payment to your Client of such sums as the Court may determine (limited as a maximum to the amount paid by your Client pursuant to the Adjudicator’s decision) and will also pay your Client’s reasonable and proportionate legal costs of such proceedings (to be assessed if not agreed). Furthermore, if your Client successfully defends the summary judgment proceedings, we agree to guarantee payment of any adverse costs order made against Meadowside. We are content to provide the first guarantee now, as a condition of your Client making payment voluntarily within 14 days and that the undertaking will also be given, as above, and effective to the extent that proceedings to overturn the Adjudicator’s decision are issued within 6 months of the date of such voluntary payment.”
“Should the Court think fit, the Claimant would be agreeable to the Adjudication Decision being enforced on condition that: a. the liquidators of the Claimant ringfence any sums paid by the Defendant as a result for a period of 6 months and, should the Defendant issue proceedings within those 6 months to overturn the Adjudication Decision, until those proceedings by the Defendant are concluded. Those monies shall be repaid to the extent that the Defendant successfully overturns the Adjudication Decision; and b. the enforcement is temporarily stayed until such time as the Claimant puts an insurance policy in place as described above.” a. the liquidators of the Claimant ringfence any sums paid by the Defendant as a result for a period of 6 months and, should the Defendant issue proceedings within those 6 months to overturn the Adjudication Decision, until those proceedings by the Defendant are concluded. Those monies shall be repaid to the extent that the Defendant successfully overturns the Adjudication Decision; and b. the enforcement is temporarily stayed until such time as the Claimant puts an insurance policy in place as described above.”
‘a.A Claimant (being an insolvent creditor), for whom Pythagoras Capital acts as agent, obtains a successful Adjudication decision and successfully applies for enforcement of that decision; b. within a certain time frame (say 6 months), the Defendant issues proceedings to overturn the Adjudicator’s decision; c. the Defendant is wholly or partially successful in overturning the Adjudicator’s decision. In those circumstances, the policy will cover any adverse costs order that a Defendant might obtain against the Claimant (to the extent that those costs resulted in the Adjudication decision being overturned).’
“In the circumstances of this case, an adjudicator's decision in favour of Bresco, a company in insolvent liquidation facing a separate cross-claim, will not be capable of being enforced. That would make the adjudication an exercise in futility. In accordance with Twintec, an injunction was therefore appropriate. There was no reason why this adjudication should have been permitted to continue; on the contrary, it was just and convenient to grant the injunction. Accordingly, I would uphold the decision of Fraser J, not on the grounds of theoretical jurisdiction, but on the grounds of practical utility.”
‘I consider that there is a basic incompatibility between adjudication and the regime set out in the Rules. The former is a method of obtaining an improved cashflow quickly and cheaply. The latter is an abstract accounting exercise, principally designed to assist the liquidators in recovering assets in order to pay a dividend to creditors. Rule 14.25 envisages the taking of a detailed account as between the company and the creditor, and the careful calculation of a net balance one way or the other, or quantifying the company’s net claim against a creditor. By contrast, adjudication is a rough and ready process which Dyson J (as he then was) said in Macob Civil Engineering Ltd v Morrison 47. Construction Ltd[1999] BLR 93 was “likely to result in injustice”. They are therefore very different regimes.’
“48. First, a liquidator has, by definition, limited assets available to him or her with which to pursue the claims of the insolvent company. It would ordinarily be a waste of those limited assets to make a claim which could not be enforced or, at best, could only be enforced in exceptional circumstances.” 49. I do not accept the idea that the adjudicator's decision might be of some use to the liquidator because it could somehow stand as a reduced proof amount (under Rule 14.11), or an estimate, or as some sort of assessment of the claim and cross-claim. The result of an adjudication is not the liquidator's best estimate of the value of a claim, but a sum found due by an adjudicator at a particular date, often based on the operation of the contractual payment provisions and the employer's failure to operate those provisions correctly. That may be far removed from the referring party's overall entitlement to recover, and the result would not be any kind of estimate or assessment of the parties' mutual debts.”
“59. As to the assessment argument, Mr Arden QC made much of the fact that the result of the adjudication might prove useful to Bresco's liquidator, even without enforcement, because it would (or might) comprise an assessment of the net balance, I have rejected that submission in paragraph 49 above. In any event, this would require the responding party to participate in the adjudication and incur the costs of mounting its own crossclaim, just so that the liquidator can see what a net, non-binding result might look like. In circumstances where the liquidator would be unlikely to use litigation or arbitration for this exercise, because of the costs exposure, and/or in circumstances where the responding party would otherwise let its cross-claim lie because of the claiming party's insolvency, it would be an abuse of the cost-neutral adjudication regime to use it as a cheap assessment service, knowing that enforcement could never happen.”
“….the argument overlooks the fact that although the result of an adjudication is not usually final, it may be final, or it may become final. This could happen because both parties agree to treat the decision as final and binding, or because the decision is not challenged by either party.”
“Secondly, there are the costs incurred by the responding party. Why should a responding party have to incur the costs of defending an adjudication brought by a company in insolvent liquidation, when it knows that, even if it was unsuccessful in the adjudication, it would be able to resist summary judgment or enforcement as of right, although it would have to spend further sums to achieve that result? This would mean that the responding party was obliged to fund its (reluctant) role in a futile process. That must be wrong in principle.”
‘Thirdly, even if we assume that the company in insolvent liquidation is successful in the adjudication and that, for whatever reason, summary judgment is granted, the responding party would then have to bring its own claim in court to overturn the result of the adjudication. That would require yet more costs to be incurred by the responding party to regularise its position and recover the sums due from a company in insolvent liquidation. The obvious risks would be that any recovery may be rendered difficult or impossible by the liquidation, and that further costs would be lost in any event. Security for costs would not be available (because on this basis the responding party would be the claimant). Again, that seems to me to be wrong as a matter of principle.’
“Finally, there is the question of the court's resources. If Mr Arden QC was right, so that companies in insolvent liquidation could commence and run adjudication proceedings all the way through to enforcement proceedings, to see how things might turn out at that stage, there would be an increase in the number of enforcement applications, and a further strain on the already overburdened resources of the TCC. It would have an adverse effect on other court users, including those companies who have organised their affairs in such a way that they are not in insolvent liquidation.”
“(b) “claims management services” means advice or other services in relation to the making of a claim, (c) “claim” means a claim for compensation, restitution, repayment or any other remedy or relief in respect of loss or damage or in respect of an obligation, whether the claim is made or could be made– (i) by way of legal proceedings, (ii) in accordance with a scheme of regulation (whether voluntary or compulsory), or (iii) in pursuance of a voluntary undertaking…”
“Where the law expressly restricts the circumstances in which agreements in support of litigation are lawful, this provides a powerful indication of the limits of public policy in analogous situations. Where this is not the case, then we believe one must today look at the facts of the particular case and consider whether those facts suggest that the agreement in question might tempt the allegedly champertous maintainer for his personal gain to inflame the damages, to suppress evidence, to suborn witnesses or otherwise to undermine the ends of justice”
‘The effect of the section extends more widely, however, for it reflects Parliament’s assessment of the present state of public policy in this area.’
“The difficulties and delays surrounding the introduction of conditional fee agreements permitted by statute emphasise the divergence of view. In my judgment, where Parliament has, by what are now (withsection 27 of the Access to Justice Act 1999 ) successive enactments, modified the law by which any arrangement to receive a contingency fee was impermissible, there is no present room for the court, by an application of what is perceived to be public policy, to go beyond that which Parliament has provided. That applied with, if anything, greater force in 1993 than it does today.”
“A person who has funded an action champertously may fail to enforce recovery of the agreed proportion of the spoils. A person who has secured a champertous agreement to fund his litigation may be unable to enforce payment of the agreed funds. But the fact that a funding agreement may be against public policy and therefore unenforceable as between the parties to it is by itself no reason for regarding the proceedings to which it relates or their conduct as an abuse.”
"Chadwick LJ then said : It was accepted by this Court in Abraham v. Thompson that, although the court retains the power to stay proceedings if satisfied that they constitute an abuse of process, the mere fact that the proceedings are being financed by a third party with no interest in the outcome - other than in relation to the prospects of repayment - is not of itself sufficient abuse to invoke the jurisdiction of the court. The court is entitled to protect its own procedures; see Roache v. News Group Newspapers The Times, November 23, 1992; but it should be careful not to use that power so as to deny access to justice to a party who has sought to fund his proceedings in a way which may itself become contrary to public policy, unless that which has been done can be seen to amount to an abuse of the court's own process. Chadwick L.J. considered what element of public policy was affronted by the funding arrangement in the case before the court. He referred to the well known passage from the speech of Lord Mustill in Giles v. Thompson[1994] 1 AC 142 at 161B. He said that the description of maintenance referred to in that passage was indistinguishable from that given by Jenkins L.J. in Martell v. Consett Iron. Chadwick L.J. then said: "
"What distinguishes lending from maintenance on the one hand and, in turn, maintenance from champerty on the other, seems to me at the border lines to raise very difficult questions. Similarly, the point at which any particular funding agreement, even assuming it is technically champertous, could be said to constitute an abuse of process is itself very far from clear. Many factors are likely to be in play. Amongst them will be these: (1) the terms of the funding agreement between the litigant and his funder; (2) their relationship quite apart from that agreement; (3) whether or not (and if so how and in what circumstances) the litigant proposes to repay the funder; (4) the relationship between the fund provided, the sum (if any) to be repaid and the sum at issue in the action; (5) the precise purpose within the proceedings for which the fund was provided." 120.Morritt LJ then continued at paragraphs 60 and 61: “60. As Chadwick L.J. said in Faryab v. Smyth, the question whether the courts' process is affected or threatened by an agreement for the division of spoils is one to be considered in the light of the facts in each case. We reject Mr Glennie's submission that the court should formulate a more circumscribed test limited to a consideration of the structure and apparent purpose of the funding agreement and the kind of litigation to which it is directed. The considerations to which Simon Brown L.J. referred in Faryab v. Smyth may in a particular case be relevant and important but they are not exclusive nor necessarily determinative in the abstract. Unless the funding agreement is plainly and obviously champertous, it will usually not be necessary to decide that question for the reasons given by Chadwick L.J. and by Millett L.J. in Abraham v. Thompson. 61. Abuse of the court's process can take many forms and may include a combination of two or more strands of abuse which might not individually result in a stay. Trafficking in litigation is, by the very use of the word "trafficking", something which is objectionable and may amount to or contribute to an abuse of the process. We think that it is undesirable to try to define in different words what would constitute trafficking in litigation. It seems to us to connote unjustified buying and selling of rights to litigation where the purchaser has no proper reason to be concerned with the litigation. "