Enforcement of adjudication in liquidation

The Claimant (JDC) was in liquidation and sought to enforce an adjudicator’s award of approximately £1.2m by way of summary judgment.

If payment was made to an insolvent company it would form part of the fund for distribution amongst the creditors. If the adjudicator's decision were then overturned, the paying party would have to prove for its claim in the liquidation and would only receive a pro-rata dividend, and would be deprived of the benefit which insolvency set-off might otherwise afford.

The court dismissed the claim for summary judgment and gave helpful guidance on the principles to be taken into account:

  1. Whether the adjudicator’s decision deals with the whole of the parties' financial dealings under the contract in question, or simply one element of it.
  2. Whether there are other mutual dealings between the parties outside the construction contract.
  3. Whether there are other defences available to the defendant that were not deployed in the adjudication.
  4. Whether the liquidator is prepared to offer appropriate undertakings, such as ring-fencing the enforcement proceeds, and/or where there is other security available.
  5. Whether there is a real risk that the summary enforcement of an adjudication decision will deprive the paying party of security for its cross-claim.

In any event, the court noted that the Claimant’s inability to repay the adjudicator’s award, if overturned, meant that a stay of execution would usually be granted even if summary judgment is awarded. 

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