Building contractor Styles & Wood (“the Claimant”) sought to enforce an adjudicator’s award of £700,000 against its Employer GE CIF Trustees Limited (“the Defendant.”) The Claimant brought proceedings on the basis of the Defendant’s refusal to comply with the adjudicator’s decision. The Defendant sought to justify its non-compliance on the ground of futility, and as such wished to bring proceedings against the Claimant regarding the final account. Importantly, the Claimant went into administration on 28 February 2020.

The parties entered into a JCT Intermediate Building Contract with Contractor’s Design (2011) for the design and build of a project in Manchester. The Claimant valued its final account at approximately £9,000,000 whereas the Defendant valued it at £5,000,000. The parties also disagreed as to the Claimant’s entitlement to an extension of time; loss and expense; and disparity in the valuation of numerous variations. In February 2020, the Claimant referred the dispute to adjudication under the contract. On day fourteen of the adjudication, the Claimant went into administration. Proceedings continued unaffected, and the adjudicator decided that the Claimant was entitled to a substantial award of £700,000 (plus VAT and interest.)

Following Bresco Electrical Services Ltd (in liquidation) v Michael J  Lonsdale (Electrical) Ltd [2020] UKSC 25 it is established that an insolvent party who wishes to enforce an adjudicator’s decision must offer adequate security to do so. The Claimant sought to fulfil this requirement by offering an ATE insurance policy (£200,000), and undertook to ring-fence any awarded enforcement sums until the conclusion of any further proceedings for final determination of the dispute. The Claimant argued that these measures provided sufficient protection to the Defendant, and that the level of ATE cover was adequate given, inter alia, the amount of work already completed, including expert evidence, and the relatively simple nature of the issues in dispute. Most evidential ground had already been covered, and so these costs would not need to be incurred twice.

The Defendant argued that the security provided was neither sufficient nor adequate to provide the level of protection required. Particularly, it was submitted that the ATE policy of £200,000 would only cover 25% of the potential costs award at the conclusion of an arbitration. The Defendant put forward a figure of £800,000 as a more appropriate level of cover. It also criticised the wording of the policy and the detail of the undertaking offered.

Finding in favour of the Claimant, the court enforced the adjudicator’s award on the basis that the security provided in this case was adequate and protected the Defendant. The court ordered that the ATE policy and requisite undertaking, namely that the sums were to be ring-fenced, must remain in force until the resolution of any appeals process arising out of an arbitration on the dispute.