Makers and Camden entered into a construction contract in June 2006 in relation to substantial refurbishments works at the Whittington Estate in Camden. In July 2007, the contract was terminated by Camden. This became the subject of two adjudications; the first to determine whether the termination was lawful (“the liability adjudication”) and the second to determine the losses incurred as a result of that termination, and uncertified and unpaid sums (“the quantum adjudication”).

 

As Makers was successful in the liability adjudication, Camden commenced legal proceedings in the TCC to finally determine liability and quantum in anticipation that Makers would commence a second adjudication. The trial was split into two parts with liability to be heard during November 2009 and quantum in spring 2010. During the litigation, Camden entered judgment in default as the defence was served and filed late. In the application to set aside the judgment before Mr Justice Akenhead, Camden raised the issue of the solvency of Makers by way of expert accountancy evidence.

 

Camden suggested that while it accepted that judgment should be set aside, a condition should be imposed to prevent Makers from adjudicating on quantum or any other issues addressed in the litigation, because any future enforcement on an adjudicator’s decision would be met with an application for a stay of execution due to Makers’ financial status. Camden also requested that Makers should provide security for costs.

 

Camden argued that, if Makers was allowed to adjudicate on quantum before the issue of liability was decided by the Court, it would be placed in a superior and oppressive position. A prime concern of Camden’s was that a further adjudication would be a costly distraction from the litigation. However, the Judge refused to restrict Makers’ statutory right to adjudicate at any time and accepted that this would mean that adjudication could be used as a commercial lever. The request for security was also denied. Subsequently, Makers commenced the quantum adjudication and the Adjudicator decided that Camden should pay Makers £1.3 million plus VAT and interest, and/or financing charges and the Adjudicator’s fees.

 

Camden refused to comply with the decision of the quantum adjudication save for the payment of the Adjudicator’s fees. Camden considered that the solvency of Makers was such that, if the Court overturned the liability and quantum decisions, Makers would not be able to repay the £1.3 million and financing charges/interest. Makers commenced enforcement proceedings in the TCC for payment to be made into Court or an escrow account, to be released upon agreement of the parties or order of the Court.

The issues were:

 

1           Whether the Court should exercise its case management powers under the Civil Procedure Rules (Part 3); and

 

2           Order a stay of execution with the Adjudicator’s award paid into Court or an escrow account; or

 

3           Order a stay of execution, without conditions, on the grounds of Makers’ insolvency.

 

During Makers’ application to set aside the judgment in default, Camden’s evidence of Makers’ financial status had persuaded the Court that Makers was insolvent. The Judge decided that the financial status must have remained the same, as there was no evidence suggesting otherwise in the current application, and that Makers would be unable to repay Camden if it went on to lose the impending trial.

 

The Judge noted that the particulars of claim were drafted with a certain sensitivity to the financial status of Makers as it asked for the payment to be into Court or escrow instead of a direct payment as was the usual practice. Another important factor was that the parties would have the judgment on liability within weeks. As a consequence, the Judge granted a stay of execution without conditions against enforcing the adjudicator’s decision. However, the Judge was prepared to grant Makers specific permission to apply to lift the stay in the event it was successful in the trial on liability.