Anglo Swiss Holdings Ltd & others v Packman Lucas Ltd [2009] EWHC 3212 TCC

Packman were owed architects fees. An adjudication took place, where the Claimants put forward detailed arguments to the effect that nothing was due and actually there had been an overpayment. The adjudicator found in favour of Packman because no withholding notices had been served. He did not therefore consider the arguments and issues raised about the overpayment.

In due course proceedings were brought by the Claimants claiming that Packman had been overpaid. Packman sought a declaration that these proceedings should be stayed on the grounds that the terms of the Pre Action Protocol for Construction & Engineering Disputes had not been followed. Paragraph 1.2 of that Protocol states that:

“A claimant shall not be required to comply with this Protocol before commencing proceedings to the extent that the proposed proceedings… (iv) relate to the same or substantially the same issues as had been the subject of recent adjudication under the 1996 Act…”  

Mr Justice Akenhead noted that:

“Part of the logic for this exclusion must be that in the adjudication process the parties will have exchanged information about their claims or defences along the lines of the Letter of Claim and Response called for in the Protocol and therefore it would be unnecessary and burdensome for the parties to have to go yet again through the process of submitting claim and response through the Protocol process.”

He therefore concluded that although the adjudicator had decided that it was unnecessary to decide whether or not in fact there was an overpayment or decide what was actually due, the parties did exchange evidence and argument about those issues. Therefore Packman was aware of what the Claimants were asserting on these issues before the proceedings were commenced. The question of how much was actually due to Packman under the contracts with the Claimants was one of the issues in each of the adjudications. The situation here, therefore came within one of the accepted exceptions to the requirement that the Protocol should be followed. Further given the exchange of information during the adjudication process on these issues, it would have been, in the Judge’s view both unnecessary and a waste of costs and resource to require the parties to go through that process again through the protocol. Packman made a further application to stay the proceedings, this time on account of the failure of the Claimants to honour the decision of the adjudicator. Despite Judgment on the enforcement application having been entered, no payment had been made. Mr Justice Akenhead noted that:

  1. The Court undoubtedly has the power and discretion to stay any proceedings if justice requires it;
  2. In exercising that power and discretion, the Court must very much have in mind a party’s right to access to justice and to issue and pursue proceedings;
  3. The power is one that is to be used sparingly and in exceptional circumstances; and
  4. Those circumstances include bad faith and where the claimant has acted or is acting particularly oppressively or unreasonably.

The question he then had to decide was, whether the established refusal to honour or satisfy a previous adjudication decision and court judgement about the very subject matter of the court case which Packman now sought to have stayed, would justify a stay of that case pending payment. Having considered the facts of the case, the Judge decided that this was a situation which justified the ordering of a stay until the adjudication decisions were honoured. He said so for the following reasons:

  1. The Claimants were simply ignoring the contractual and statutory requirements that they should honour adjudicator’s decisions until the final resolution of the underlying disputes;
  2. By ignoring these requirements, the Claimants were avoiding the “pay now argue later” approach of the HGCRA. This altered the commercial balance. If Packman had been paid, it would have had the money in hand which would put it in a stronger commercial position in relation to the Claimants. Pursuing these proceedings without honouring the adjudications gave the Claimants an advantage which the HGCRA does not permit.
  3. The bad faith comes in putting forward claims which they either knew were significantly exaggerated or claims in respect of which they have no knowledge whether and if so to what extent they are good claims.
  4. It was clear that the Claimants have no difficulty instructing lawyers to act for them in the current claims. Therefore, there was no good reason why the Claimant or those behind the Claimants could not honour the decisions and judgements against them; and finally.
  5. The parties are not on the equal footing in which they should have been if the Claimants had honoured their contractual commitments.