Since the 2015 judgement in Galiford Try v Estura ("Estura") in which the court granted a partial payment of an adjudicator's award resulting from a"smash and grab" adjudication, parties to such adjudications in England have sought to test the boundaries of the principles set out in that action.
The recent TCC case of Equitixv Bester Generacion is another example of such a challenge and further confirmation of the position in Estura.
Equitix were a special purpose vehicle (SPV) set up to procure the design and construction of a biomass energy plant, Bester Generacion contracted with Equitix to carry out the works. Progress was slow and the parties quickly fell into dispute, Equitix elected to terminate the contract and not to continue with the Project.
The contract between the parties provided a somewhat complex calculation for ascertaining the amount of compensation and damages to be paid by either party in the event that the termination clause is triggered. The result of this calculation was that Bester Generacion was due to pay to Equitix the sum of circa £11.5million. Equitix issued an interim account claiming payment of that sum. There was a dispute about the validity of the termination and the accuracy of the calculation. Bester did not pay and the matter was referred to adjudication.
The adjudicator awarded a payment of circa £9.8million to Equitix, again Bester did not pay and Equitix raised enforcement proceedings.
Bester ran three main lines of defence, the final defence being that if the court accepted that the sums awarded by the adjudicator were due there should be a stay of execution pending final determination - essentially Bester asked the court to either give no effect, or partial effect, to the adjudicator's decision until a court or arbitrator could make a final decision as to what was due between the parties.
In considering the point Coulson J set out again the main principles for the court to have in mind when deciding whether to grant a stay:-
- Adjudication is intended to be a quick and inexpensive method of arriving at a temporary result
- Adjudicators' decisions should ordinarily be enforced
- The court must exercise its discretion having regard to points 1 & 2 above
- The probable inability of a party to repay the sum awarded at adjudication may constitute "special circumstances" allowing the court to grant a stay
- If the successful party to the adjudication is insolvent (or there is no dilute that they are insolvent) then a stay will be granted
He then turned his attention to the Estura position in which a smash and grab adjudication on an interim account was to be distinguished since the interim account came after the works had been completed and was therefore in actuality an indicative final account. It could be months or years before the final account was resolved and with little incentive for the contractor to carry out outstanding works and snagging the judge in Estura found that it would be unfair to enforce the adjudicator's decision in full.
In applying those principles to the situation before him Coulson J found that the Equitix case was an unusual one, since Equitix had elected to terminate and not to continue with the project it had become "an SPV with no P" that being the case, not only was the interim position in truth a final position but Equitix had no possible incentive to remain in existence for a minute longer than it needed to. Equitix were unable to satisfy the court as to their financial position and it was determined that as a matter of fairness and justice a stay was appropriate. The court awarded Equitix a payment of just under half the sum awarded by the adjudicator.
This case is interesting not only because it confirms the position in Estura but because it underlines the TCC's approach to smash and grab adjudications which grant large sums to a claimant without there being any clear route for recovery by the paying party. In the past few weeks Lord Coulson in the case of Grove Developments Limited v S&T (UK) Limited has taken a further swipe at this somewhat divisive tactic.
There is no strictly equivalent process to a stay of execution in Scotland, it will therefore be interesting to see how the Scottish Court will deal with this point, will they give effect to the decision nonetheless or will they refuse to grant any payment where serious questions of fairness and justice arise?
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