Asking for it

Derek Vago and Wimbledon Construction entered into a £200k contract for a house extension and then fell out. The builder called for the adjudicator. Balls were knocked across the net. The adjudicator said it was game, set and match to the builder, and told Vago to pay £123k.

But Vago balked. He pointed to the financial position of the builder and said there was a real risk this money would never be repaid. In other words, while the adjudicator was not persuaded by Vago’s reasons for holding on to the £123k, Vago was convinced an arbitrator in the next round would see it his way. So it asked the High Court to lock away the £123k in the meantime.

Now, just think for a moment. The adjudicator worries himself scatty to decide the quarrels on the contract and the evidence put to him. If he says £123k ought to have been paid, it is a binding decision. The adjudicator has said the wrong person is in possession of the cash. That £123k is Wimbledon’s money. The High Court is being asked to nab Wimbledon’s money and lock it up so that it can’t have it.

The court said the critical issue was the interaction between the adjudication process and the rules of the High Court. The rule in the Construction Act is that if either party does not comply with the decision of the adjudicator, the other party is entitled to take legal proceedings to secure compliance. The High Court rules, meanwhile, state that where a judgment is given or an order to pay money is made but the court is satisfied that special circumstances “render it inexpedient” to enforce the ruling, the court may stay the judgment’s execution.

Before I tell you what happened, it strikes me that the rules of the High Court are not talked about in the Construction Act. The rules are designed to control litigation. Yet a huge magnet pulls adjudication under the rules of the High Court. The Court of Appeal in Connex vs MJB, in March this year, gave a big hint that this yank was not necessarily so.

Anyway, the High Court assumed that there was a link between its rules and adjudication, so what “special circumstances” could keep Wimbledon’s money locked away?

The adjudicator has said that £123k is Wimbledon’s money. The High Court is being asked to nab Wimbledon’s money and lock it up

Vago became jittery because Wimbledon is a minnow. Its turnover in the year when the contract was signed was only £320,000 and its profit was a smidgen over £8000. This year its turnover is £600,000 and it has reported a loss

of £69,000. The money owing because of the dispute did have an impact on that loss figure, however. The company’s director pumped in a lump of cash, which gave Wimbledon net assets of £15,000. It is not insolvent, but there isn’t much there. You might sense the nervousness of Vago if he is eventually proved to have a better case than he could show the adjudicator.

The judge reviewed previous cases for principles upon which to base his decision about staying enforcement. He found that:

• Adjudication is designed to be a quick, inexpensive and temporary;
• The decision is to be enforced summarily and should not keep the successful party out of its money;
• An application to stay under the High Court rules should keep the two previous points in mind;
• The probable inability of the receiving party to repay the sum at the end of a substantive trial might constitute special circumstances;
• If the payee is insolvent, a stay will usually be granted;
• There will usually be no stay if the payee’s financial position is the same as or similar to its position at the time the contract was made, or if the payee’s financial position is due wholly or in significant part to the payer’s failure to pay the sum awarded by the adjudicator.

So Wimbledon got its money, or rather got judgment for the whole sum. It won because when the contract was formed, it was in much the same financial health as it is today. And its health was impaired by being denied the cash that the payer wanted kept in court. In short, Vago “contracted for this result”. Whether he actually looked that hard at his builder’s financial condition is nothing to the point. He could have done.