RHP Merchants And Construction Ltd v Treforest Property Company Ltd

[2021] EWHC B40 (TCC)

TPC applied to stay and strike-out a claim by RHP for £105k on the grounds that RHP had failed to comply with an adjudicator’s decision despite there being a court order requiring them to pay the sum of £300k. RHP relied on the fact that, eight days after the enforcement judgment, there was a second adjudication decision where TPC was ordered to pay RHP £245k, including the adjudicator’s costs. This sum was calculated on the assumption that RHP had paid the first adjudication award to TPC. The Judge, Roger Stewart QC, noted the need to strike a balance between the general HGCRA policy of “pay now, dispute later;” and the rights of parties to have access to the courts with any litigation being conducted promptly and efficiently.

Amongst other issues, TFC issued a petition for a winding-up order against RHP. This application was dismissed and TFC were ordered to pay indemnity costs at £23k. The Judge noted that this appeared to be because the alleged debt or petition sum was disputed substantially in the court proceedings here. Other offers were made. TFC offered to set off the costs order which they were subject to. RHP offered to pay the sum of £36,494.69 (a figure based on netting off the two adjudication decisions) on the basis that the TFC application was withdrawn.

One of the options, TFC sought was that proceedings should be stayed pending payment of the outstanding amount of the judgment debt, subject to a six-month longstop whereby the claim should be struck out if payment was not made. RHP’s position was that the proceedings should not be stayed at all, but if the Court was minded to grant a stay, that should be on the basis that proceedings were stayed until RHP paid the balance of the sums owed between the parties pursuant to the respective adjudication and court orders. TFC relied on the case of Anglo Swiss Holdings LTD & Ors v Packman Lucas Ltd  (See Issue  115) where Mr Justice Akenhead had said:

“i. The Court undoubtedly has the power and discretion to stay any proceedings if justice requires it.

ii. In exercising that power and discretion, the Court must very much have in mind a party’s right to access to justice and to issue and pursue proceedings.

iii. The power is one that is to be used sparingly and in exceptional circumstances.

iv. Those circumstances include bad faith and where the claimant has acted or is acting particularly oppressively or unreasonably.”

In that case, the Judge held that the claimants were ignoring the contractual and statutory requirements to honour an adjudicator’s decision, and that they were, therefore, avoiding the pay-now-argue-later approach of the HGCRA. The bad faith involved putting forward claims which they either knew or significantly exaggerated.

TFC said that RHP was ignoring the contractual and statutory framework; that, had the applicant been paid, it would have the money in hand; that they were not insured; RHP could fund solicitors and counsel; and, that the parties were not in an equal footing. TFC said that RHP had “commenced a barrage” of different forms of dispute resolution and had confirmed in a solicitor’s letter that it had no intention of complying with the Court’s previous order of 5 November. 

RHP said the situation was different, in particular because of the existence of the second adjudication. The policy of pay-now-and-argue-later should apply with equal force to the second decision, which affected the majority, though not the entirety of the sums due under the first adjudication decision. TFC said that there was a substantial difference between the position of the first adjudication award which has been found to be enforced, and that of the second adjudication decision, which had not been enforced, but where there were obvious question marks as to the jurisdiction. 

The Judge noted the tension between access to justice and the core essence of the adjudication pay-now-and-argue-later regime, which necessarily involved the ability to argue later. In balancing these considerations, the Judge cautioned that in line with the Anglo Swiss case, a stay would only apply in clear cases.

Here, the Judge felt that the second adjudication was of importance, in the context of pay-now-argue later,  when looking at the overall position. This was despite the fact that the Judge had considerable doubts as to whether or not the second adjudicator did in fact have jurisdiction. Further, the insolvency Judge had decided that there was a real dispute which was going to be decided in these proceedings.

That said, there was no valid reason why RHP had not paid the net sum which was due to TFC on the basis of the two adjudication decisions, and even taking into account the costs orders. Taking account of the fact that RHP had managed to achieve success in the second adjudication award, it owed a minimum sum of £36,494.69, always taking into account the fact that they could, in due course, seek to reopen that. 

This was not a case where RHP had acted in bad faith. RHP’s actions were consistent with a “determined view” that they were owed money rather than the other way around. However, it was not right to simply give an order to that effect without any time limit and without any sanction, given that RHP had said that it could pay that sum. The Judge, therefore, ordered that, unless RHP paid the sum of £36,494.69 to Treforest within 28 days of today, these proceedings would be struck out.

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