Straw Realisations (No 1) Ltd v Shaftsbury House (Developments) Ltd: TCC 20 Oct 2010

The applicant sought summary judgment on two construction arbitration decisions. The defendant objected saying that the claimant was impecunious.
Held: Edwards-Stuart J considered the position applying to an impecunious claimant seeking to enforce an arbitration award: ‘If, at the date of the hearing of the application to enforce an adjudicator’s decision, the successful party is in liquidation, then the adjudicator’s decision will not be enforced by way of summary judgment: see Bouygues v Dahl Jensen and Melville Dundas. The same result follows if a party is the subject of the appointment of administrative receivers: see Melville Dundas.
For the same reasons, I consider that if a party is in administration and a notice of distribution has been given, an adjudicator’s decision will not be enforced.
If a party is in administration, but no notice of distribution has been given, an adjudicator’s decision which has not become final will not be enforced by way of summary judgment. In my view, this follows from the decision in Melville Dundas as well as being consistent with the reasoning in Integrated Building Services v PIHL.
If the circumstances are as in paragraph (4) above but the adjudicator’s decision has, by agreement of the parties or operation of the contract, become final, the decision may be enforced by way of summary judgment (subject to the imposition of a stay). I reach this conclusion because I do not consider that the reasoning of the majority in Melville Dundas extends to this situation.
There is no rule of English law that the fact that a party is on the verge of insolvency (‘vergens ad inopiam’) triggers the operation of bankruptcy set-off: see Melville Dundas, per Lord Hope at paragraph 33. However, the law in Scotland appears to be different on this point (perhaps because the Scottish courts do not enjoy the power to grant a stay in such circumstances).
If a party is insolvent in a real sense, or its financial circumstances are such that if an adjudicator’s decision is complied with the paying party is unlikely to recover its money, or at least a substantial part of it, the court may grant summary judgment but stay the enforcement of that judgment.
. . the factors affecting the discretion of the court when considering whether or not to grant a stay where it appears that the successful party would be unable to repay an award if it was subsequently held to be wrong are clearly set out in the judgments of Coulson J in Wimbledon Construction Ltd v Derek Vago [2005] BLR 374, Mead General Building Ltd v Dartmoor Properties Ltd [2009] EWHC 200 (TCC) and Pilon Ltd v Breyer [2010] BLR 452 – the last two involving a Company or Creditor’s Voluntary Arrangement. Broadly speaking, Coulson J said that where a party is in insolvent liquidation or there is no dispute on the evidence that it is insolvent (or unlikely to be able to repay the sum awarded by the adjudicator), a stay of execution will usually be granted unless either that party’s financial situation was the same or similar to its financial situation at the time when the relevant contract was made or its insolvency is due, either wholly or in significant part, to the other party’s failure to pay the sums awarded by the adjudicator (this is just a broad summary in my own words for convenience: where the point arises reference should be made to Coulson J’s judgments).’
Edwards-Stuart J
[2010] EWHC 2597 (TCC), [2011] BLR 47, 133 Con LR 82
England and Wales
Cited by:
CitedAlexander and Law Ltd v Coveside (21BPR) Ltd TCC 12-Dec-2013
The claimant sought to enforce an arbitration award. The respondent resisted, saying that the claimant faced unresolved insolvency proceedings, and may be unable to repay any sum later found due. . .

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Updated: 28 February 2021; Ref: scu.425363