A recent case in the Technology and Construction Court (TCC) considered the relationship between insolvency and the enforcement of adjudicators' decisions, a subject we covered in our Autumn 2016 Construction Briefing.
When a company enters administration, or files a notice of its intention to do so, it becomes subject to a moratorium on adverse creditor action. Essentially, a moratorium protects the company from (amongst other things) attempts by others to repossess goods in the company's possession, begin legal proceedings, or take security of the company's property. These steps can only be taken with the consent of the administrator, or with the court's permission. The idea is that the company and its assets are protected.
In South Coast Construction Ltd v. Iverson Road Ltd  EWHC 61 (TCC) Coulson J considered how the moratorium may affect the ability to enforce an adjudicator's decision.
By way of background, South Coast Construction Ltd had been engaged by Iverson Road Ltd to build apartments and houses at a site in London. In September 2016, a dispute relating to an application for payment was referred to adjudication. The adjudicator found that South Coast Construction Ltd was entitled to £868,728. South Coast Construction Ltd was not paid, and so issued enforcement proceedings. Iverson Road Ltd challenged enforcement, on the basis that the adjudicator had exceeded his jurisdiction, and a hearing was listed for 18 January 2017.
Iverson Road Ltd informed the court on 16 January 2017 that it was under a 10-day moratorium that did not expire until 18 January 2017. As explained above, when a company is under a moratorium, the court has the power to permit proceedings to proceed.
Although Coulson J delivered his judgment the following day (and so the moratorium had ended), he concluded that, had the moratorium continued, he would have allowed the enforcement hearing to take place for two reasons:
(i) there was no evidence that the purpose of the moratorium would be jeopardised by providing the court's conclusion on jurisdiction, and it was fair and appropriate to hear the application given that Iverson Road Ltd had, in the view of the court, behaved in a way which should not be rewarded by the court; and
(ii) the nature and purpose of statutory adjudication requires the courts to respect and enforce an adjudicator's binding decision.
Coulson J considered that a party such as South Coast Construction, with a decision in its favour from an adjudicator was in a much better position than most to argue the court should exercise its discretion for the matter to proceed to an enforcement hearing.
Consider your opponent's solvency
This case acts as timely reminder of two key principles of adjudication that the courts are reluctant to interfere with an adjudicator's decision and will generally enforce it, and that you should consider the solvency of your opponent before commencing enforcement proceedings.