A late October 2010 case Straw Realisations v Shaftsbury House illustrates the courts’ approach to technical and insolvency-based challenges regarding enforcement of adjudicators’ awards. Given the current spate of contractor insolvencies and popularity of adjudication, any trust facing an adverse adjudicator's decision in favour of its contractor should not pay without due consideration.
Haymills (Contractors) Ltd went into administration in August 2009 having already won one adjudication against its employer, Shaftsbury, and having just commenced another, which it subsequently also won. Given Haymills’ administration, Shaftsbury refused to pay the amounts awarded in either adjudication, relying on numerous heads to resist payment:
- A jurisdictional challenge based on the adjudicator not having jurisdiction given the insolvency event. This failed because the adjudication(s) had commenced prior to the administration. In fact the correct legal interpretation was that the adjudicator lacked jurisdiction to consider the insolvency.
- The second adjudicator was alleged to have breached rules of natural justice in basing part of his decision on his own programme, which Shaftsbury were not given proper opportunity to comment upon, but it was evident that this was not in fact the case.
- A contractual provision stated no payment would be due to the contractor if it became insolvent, but summary judgment was still held to be appropriate in relation to the earlier adjudicator's award because it pre-dated the appointment of the administrator.
- If the decisions were valid, there should be a stay of execution given Haymills’ administration. Haymills’ finances were such that this was indeed awarded in relation to the earlier decision, that otherwise would have been payable. The court further held that no stay was needed in relation to the later award because a (relatively unusual) contract clause prevented it from becoming binding where it had been challenged within three months and Shaftsbury had done just enough to protect themselves on that front.
This case highlights two consistent threads, namely that the courts will generally uphold adjudicators’ decisions but often show leniency to the paying party in an insolvency situation.