Sutton Services International Ltd v Vaughan Engineering Services Ltd

[2013] NIQB 63

This is a case from Northern Ireland, where Vaughan argued that there should be a stay placed on an adjudicator’s decision because of the financial position of the plaintiff. (In Northern Ireland, they still use the traditional court terms.) Vaughan said that they proposed to proceed against Sutton for defective work but had concerns that Sutton, having received payment under the adjudicator’s award, would be unable to repay the amount that Vaughan expected to be finally awarded. Weatherup J noted that it was important that the exercise of the discretion to grant a stay must not be used to frustrate the purpose of adjudication. The onus was on the defendant to establish that the plaintiff was probably going to be unable to make the payment to the defendant should the defendant ultimately be successful. He also referred to the Wimbledon v Vago case (Issue 61) noting that even if a defendant establishes that the plaintiff will probably be unable to repay the defendant, that would not usually justify the grant of a stay if:

(i) the plaintiff’s financial position is the same or similar to its financial position at the time when the relevant contract was made; or
(ii) the plaintiff’s financial position is due either wholly or in significant part to the defendant’s failure to pay those sums which were awarded by the adjudicator.

The Judge said that the Court may take into account the diligence of a defendant in pursuing the claim against the plaintiff, as the defendant’s conduct of that claim may provide a basis for refusing to grant a stay, or a basis for granting a stay for a limited time to enable the Court to review the progress of the defendant’s claim against the plaintiff.

The Judge was of the view that Vaughan had raised reasonable grounds for concern about Sutton’s ability to repay if Vaughan brought a successful claim. Further, Sutton’s financial position was not as it was at the time of the contract. There had been discussion about the provision of an insurance policy to cover Sutton’s potential liability, but the existence of a suitable policy had not been established. The indemnity that was offered under the policy was stated to be in relation to the circumstances notified. It was not clear what the circumstances notified might be. The entitlement under the policy was subject to the terms and conditions of the policy and again it was not clear what the impact of the terms and conditions might be.
Then there was an issue as to whether the policy applied at the relevant time for the purposes of the defendant’s claim. Therefore the Judge ordered a stay, however it was subject to the monitoring by the Court of the progress of Vaughan’s claim.

Indeed, the Court ordered that there would be a stay provided that (i) Sutton paid the balance owing into Court within 3 days; and (ii) Vaughan issued proceedings within 3 days and served the Statement of Claim within 21 days. There was also to be a review of the stay in September 2013 to establish how the proceedings were progressing.

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