Westshield Civil Engineering Ltd and Westshield Ltd v Buckingham Group Contracting Ltd

Westshield Civil Engineering Ltd and Westshield Ltd v Buckingham Group Contracting Ltd [2013] 1825 (TCC)

This case concerns the enforcement of an adjudicator’s decision where the winning party was financially unstable and queried whether a stay of execution could be granted in such circumstances.

Westshield Civil Engineering Ltd (‘WCEL’) and Westshield Ltd (‘WL’) were the subcontractors of the defendant, Buckingham Group Contracting Ltd, the main contractor (“Buckingham”). Buckingham was engaged to construct a new studio for the TV show Coronation Street and in turn engaged WCEL/WL as their drainage subcontractors. Although the quote and meetings referred to WL as the subcontractor, the unsigned subcontract order identified WCEL as the subcontractor.

A dispute arose between the parties as to the final account with WCEL claiming approximately £550,000 and Buckingham valuing their subcontractor’s works at about £364,000. Buckingham referred the dispute to adjudication, whereupon WCEL responded that the incorrect party was named on the subcontract order and should actually have been WL, as WCEL was dormant (note the similarities with the other 2013 case Derek Hodd Limited v Climate Change Capital Limited).

To resolve the issue, both parties granted the adjudicator jurisdiction to decide who the correct subcontractor was. The adjudicator decided that £505,000 was due to WCEL who was the correct subcontractor.

As no payment was forthcoming from Buckingham, WCEL commenced a second adjudication to enforce payment at which Buckingham surprisingly confused matters by arguing that WCEL was not the correct subcontractor, WL was and therefore the adjudicator’s decision was unenforceable. This was obviously a tactical manoeuvre to avoid payment.

WCEL and WL then issued Civil Procedure Rules (CPR) Part 7 court proceedings to enforce the adjudicator’s decision and obtain payment and also sought a declaration that all the parties were finally bound by the adjudicator’s decision. Unbeknown to WCEL and WL, Buckingham had by this time already commenced court proceedings in order to challenge the adjudicator’s decision and prevent it from being finally binding but had not actually served those proceedings on WCEL or WL. Buckingham argued that a stay of execution of the adjudicator’s decision should be granted due to the financial position of WCEL.

The judge, Mr Justice Akenhead, enforced the adjudicator’s decision but declined to order a stay of execution against WCEL/WL. He also declined to grant a declaration that the parties were bound finally by that decision. This means the adjudicator’s decision was temporarily binding on the parties until it was finally resolved by litigation or arbitration. A stay of execution was declined on the basis that Buckingham was aware of the financial instability of WL/WCEL at the time the contract was formed and that WCEL was a dormant company without any assets. They could not now raise this point to frustrate enforcement and avoid payment. A party’s financial situation may be a factor in granting a stay of execution if it cannot repay sums awarded in the adjudication in later proceedings but perhaps the court was influenced by WL offering to guarantee WCEL’s liabilities in the event that sums were due to Buckingham in the subsequent litigation. Previous case law sets out factors to be assessed in granting a stay:

Adjudication is designed as a quick and inexpensive method of dispute resolution;
Adjudicators’ decisions are intended to be enforced temporarily to promote cashflow;
The possibility of the winning party being unable to repay the judgment sum is a factor in granting a stay;
If the winning party is insolvent then a stay will usually be granted, however if its financial circumstances suggest it may not be able to repay subsequent awards that would not usually justify a stay if (i) the party’s financial situation is the same or similar to the time when the contract was made or (ii) caused mainly by the other party’s failure to pay sums awarded by the adjudicator.

The tactical approach adopted by Buckingham was criticised by the judge in commencing an adjudication and then seeking to confuse matters in respect of the identity of the subcontractor.

So, a happy ending for the subcontractors here, perhaps only temporarily, but this case serves as a reminder of the factors the court will consider when assessing whether to grant a stay of execution and demonstrates the court’s support for adjudication and the temporarily binding nature of decisions to aid cashflow. In order for a party to successfully argue for a stay of execution it needs to raise very persuasive reasons to convince the court.

It is also important to be alert to parties’ tactical manoeuvres to challenge enforcement of decisions as the issuing of a claim form (without service) amounts to commencing proceedings and was sufficient to stop the clock ticking in rendering the adjudicator’s decision final and binding according to the terms of the subcontract.

This article was created by construction lawyer --Najma Dunnett as part of an ongoing series of legal articles. Follow Najma on Twitter to keep up to date with the latest changes in construction law @NDunnett_Cons.