The Technology and Construction Court has granted an injunction preventing a claimant from taking steps in adjudication proceedings. This is a rarely sought application and it is even less likely to be granted. Here's why:
Background
Three Limited companies (Mentmore Towers, Good Start and Anglo Swiss Holdings - 'Mentmore') were set up by a family trust in Jersey. They acquired and sought to develop the 'In and Out Club' in Piccadilly and the Mentmore Towers in Buckinghamshire. They engaged Packman Lucas as their structural engineer.
Work commenced under a consultancy agreement until the developments encountered planning difficulties. By this stage Packman was owed significant amounts and was not being paid.
Adjudication 1
In April 2009 Packman referred the matter of unpaid fees to adjudication. Mentmore had not issued any payment or withholding notices. Packman was successful due to the lack of withholding notices and obtained three awards, against the three companies, amounting to £419,715 in unpaid fees. Mentmore did not pay.
Enforcement
Packman successfully enforced the adjudicator's decisions, outside of jurisdiction, and obtained Charging Orders. Mentmore still refused to pay.
Litigation
Mentmore commenced proceedings alleging that Packman had been overpaid by £420,000. It is apparent that Mentmore did not consider that it was bound to pay the adjudicator's awards, on the grounds of lack of withholding, when it considered that the underlying dispute would swing the balance back toward Mentmore.
Mr Justice Akenhead identified exceptional circumstances and ordered that proceedings be stayed until Mentmore complied with the adjudicator's decisions. Mr Justice Akenhead considered that Mentmore's disregard of the 'pay now argue later' ethos of the Construction Act in order to secure an unfair commercial advantage in the proceedings. This was unacceptable.
Mr Justice Akenhead suspected that the claim was grossly inflated. Mentmore put forward claims they knew nothing of. This was in bad faith. The court restored the equal footing the parties would have been on had Mentmore observed the adjudicator's decisions.
Adjudication 2
Mentmore were not concerned with the court's decision and referred the matter to adjudication in the alternative. This is in spite of Mr Justice Akenhead expressly deciding that there had been bad faith.
Packman reached breaking point and applied for an injunction to prevent any steps being taken in adjudication 2 until the award made in adjudication 1 had been honoured.
Mentmore were adamant that their claim for overpayment would eclipse the decision in adjudication 1, as that had been found on a technical point and not the merits of the underlying dispute. This belief is academic. Mentmore were playing games. Mr Justice Edwards- Stuart cut through this and granted the injunction. It was held that:
- the court has the power to grant an injunction restraining a party from pursuing a referral to adjudication;
- there is no difference, in principle, between the criteria for granting an injunction and ordering a stay of the same claim if it was brought in the courts; and
- even though Mentmore were allegedly no longer exaggerating their claim, the bad faith (or removal of it) was not the deciding factor: Mentmore had behaved in an unreasonable and oppressive manner.
Mentmore attempted to argue that paying now would prejudice their financial position and the Charging Order should be sufficient. This was struck down primarily because Mentmore did not disclose any evidence to support this. I wonder if this argument would hold force if it could be proved.
Conclusion
That point aside if you take the risk of playing games with the adjudicator's decision you may find yourself on the receiving end of an expensive and public injunction application. The bottom line is that an adjudicator's decision must be obeyed. Ignore it at your peril.
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