Adjudication enforcement: administration is no escape route

In South Coast Construction Ltd v Iverson Road Ltd, the Technology and Construction Court found that an administration moratorium should not prevent enforcement.

06 April 2017

In the recent case of South Coast Construction v Iverson Road Limited [2017] EWHC 61 (TCC), South Coast Construction ("South Coast") had obtained an adjudicator’s decision against the employer, Iverson Road Limited (“Iverson Road”), in a sum approaching £900,000. Iverson Road refused to pay the award so South Coast commenced enforcement proceedings in the Technology and Construction Court (TCC).

So far, nothing out of the ordinary but, before the hearing date, Iverson Road issued a series of three notices of intention to enter into administration (the "Administration Notices"). The Court therefore had to consider enforcement of the adjudicator’s decision against the backdrop of a statutory moratorium under the Insolvency Act 1986.

The moratorium

The Administration Notices were governed by the Insolvency Act 1986, which imposes an interim 10 day moratorium on any proceedings (meaning that legal proceedings cannot usually be brought against the company during this period). The final moratorium imposed by the third notice expired the day after the enforcement hearing was due to take place.

Two days before the hearing, Iverson Road informed South Coast and the Court of the Administration Notices. In spite of the moratorium, the Court had judicial discretion to decide whether to allow the enforcement proceedings should continue.

As it turned out, Mr Justice Coulson did not have to expressly decide this issue as he did not issue his judgment until the day after the hearing, by which time the moratorium had expired. Even so, as the parties had both made detailed submissions on the point, he gave a reasoned judgment.

No escape from enforcement

Having considered the case law on when the Court should exercise its discretion to allow proceedings to continue Mr Justice Coulson found that:

  • In view of the advanced stage of the proceedings, no additional costs would be incurred by deciding the enforcement claim and therefore neither party would benefit if the Court decided not to determine the enforceability of the adjudicator’s decision. In forming his view, the judge was critical of Iverson Road’s conduct, and specifically highlighted the fact that (a) three Administration Notices had been served, none of which contained any evidence of the financial position of the company; and (b) Iverson Road had not informed South Coast or the Court of the Administration Notices at the time they were issued.
  • The judge was unconvinced that any judgment against Iverson Road would run the risk of preferring South Coast over any other creditor as, even armed with a judgment, South Coast would still only be an unsecured creditor.
  • In addition to considering the points of principle, Mr Justice Coulson also relied on the nature and purpose of statutory adjudication, referring to the "pay now, argue later" principle underlying the process. He referred to the unique nature of adjudication enforcement proceedings, and pointed to the fact that a party that has an adjudicator’s decision in its favour is "in a much better position than most to argue that the court should exercise its discretion to continue to an enforcement hearing".

Lessons learned

This case highlights the common sense approach that the courts tend to take when exercising judicial discretion, and its desire to reach an equitable result. This particularly emphasises the importance of parties acting reasonably, as opposed to "playing something of a deliberate double game" which is how Mr Justice Coulson described Iverson Road's behaviour.

Although these comments were dicta, it does not appear that parties will be able to avoid enforcement during a moratorium imposed by the 1986 Act. Once again, this is a further illustration of the TCC’s desire to enforce adjudicators’ decisions.

Whilst tactics often play a key part in adjudication, it is important that these are properly considered to reduce the risk of being viewed as playing games and being penalised by the court. It remains the case that it will only be in the most rare of circumstances that the TCC will decline to enforce an adjudicator's decision.

This article was written by Tim Kittow.

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William Gard

William Gard Partner

  • Construction and Engineering
  • Infrastructure
  • Arbitration

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