An accident waiting to happen

Twenty years ago Mrs Teasdale bought three terraced properties in Leeds for £10,000 each as part of a proposed pension plan. The properties were affected by asbestos contamination and with a grant from Leeds Council, Teasdale intended to refurbish the properties, keep two and sell the third. In May 2004 she entered into a JCT Minor Works contract for the refurbishment works with Harlow & Milner for the sum of £264,877. The grant monies promised were, the court was told, £230,000 although there was no reference to this in the building contract.

Disputes arose and the matters were referred to an adjudicator in accordance with the express terms of the JCT contract and the adjudicator awarded Harlow £90,000. She refused to pay and the matter was referred to the Technology and Construction Court for enforcement proceedings which Teasdale disputed on three grounds. Firstly, that Harlow’s work was defective and she therefore had a valid counterclaim. Secondly, the adjudication proceedings were, in some way, unfair because they were too quick, and thirdly, that there was a risk that Harlow would not be able to repay any sums that may be found to be due to Teasdale.

The Judge promptly dismissed each of Teasdale’s defences and ordered her to pay Harlow £104,000 (the sum now included costs and interest) within 28 days of the judgment.

She failed to pay and commenced arbitration proceedings against Harlow. Harlow made an application to the court for an interim charging order against the properties. She failed to attend the hearing but pleaded, through her solicitors, that the final charging order should be suspended until the resolution of the arbitration. The Judge rejected the defence in short shrift stating that:

“[Teasdale] is not entitled to ignore the judgment of this court and to delay her payment to [Harlow] in the hope that ‘something may turn up’.”

A final charging order was issued against Teasdale’s properties. She sought to appeal the order but the Court of Appeal dismissed the application.

These difficulties stem not from the adjudication but from the way in which the contractual arrangements were set up

Teasdale once again failed to make the payment ordered by the court so Harlow went back to court and sought an order for the sale of the property. She attended court to resist the application.

Once again Teasdale pleaded that the matter was subject to arbitration proceedings and should be stayed. She also advanced the defence that the Judge had no jurisdiction to make such an order and should, at least, exercise his discretion in the matter.

His Honour Judge Peter Coulson QC concluded that the fact that arbitration proceedings were ongoing was a wholly insufficient ground upon which to oppose the application. He went on to observe that if he acceded to Teasdale’s request not to make the order of sale because of the on-going arbitration it would be condoning defaulting debtors and the refusal to comply with the earlier judgment of the court. For those reasons he concluded that “it is a position which I am simply unable to adopt”.

The Judge ordered the sale of Teasdale’s property. In closing he offered the following salutary lesson:

“Finally, I should say that while I have considerable sympathy for [Teasdale]... I have concluded that these difficulties stem not from the adjudication but from the way in which the contractual arrangements were set up in the first place. The absence of any contractual nexus between the ultimate payer (Leeds City Council) and the ultimate payee [Harlow], with [Teasdale] stuck between them, meant that what happened was always a very real possibility. It was, as I put to Teasdale in argument, an accident waiting to happen.”