Pioneer Cladding Limited v John Graham Construction Limited
John Graham Construction Limited (“Graham”) were contracted to work at a site in South Shields. They sub-contracted the cladding and curtain-walling work to Pioneer Cladding Limited (“Pioneer”). The contract included a term stating that any disputes between the parties would be referred to an adjudicator.
In fact, several issues did arise, and Pioneer referred two disputes to adjudication. In the first, the adjudicator decided that Pioneer were entitled to £222,394.20 under the cladding sub-contract and, in the second, that Pioneer had been overpaid by £29,388.67 under the curtain-walling sub-contract. The result was that Graham owed Pioneer £193,005.53.
When Graham failed to pay this sum, Pioneer brought proceedings in the High Court to enforce the adjudicator’s decision. In response, Graham applied for a stay of execution of the decision.
There were three issues for the High Court to decide: (1) would Pioneer be able to repay the award, (2) were Graham aware of Pioneer’s financial position at the time the contract was made, and (3) was Pioneer’s financial position due to Graham’s failure to pay the award.
If it was probable that Pioneer would be unable to repay the award, the court would refuse to enforce the adjudicator’s decision in order to protect Graham in case the decision was reversed on appeal. The pendulum would only swing back in Pioneer’s favour if they could show either (a) that Graham were aware of Pioneer’s precarious financial position, and the associated risks, at the time the contract was made and therefore could not now rely on the court to protect their interests, or (b) that Pioneer were only in such an unstable position because Graham had failed to pay the award. In either case, the court would enforce the award after all.
Mr Justice Coulson found in Graham’s favour on all points, holding that: (1) Pioneer would not be able to repay the award if the decision were reversed on appeal, (2) Graham were not aware of Pioneer’s true financial position at the time the contract was made, and (3) Pioneer’s position was not due to Graham’s failure to pay the award.
The court called Pioneer an “unusual case” and “one of those rare occasions when… the defendant has made out a good case for a stay of execution”. Therefore, it is unlikely that the court’s approach will significantly change in the wake of this decision. Nevertheless, businesses will do well to be aware of the factual finding that, even though Graham had “robustly vetted” Pioneer, Pioneer misled Graham as to their financial position. It may be that future defendants will not receive such a favourable outcome if the claimant is more transparent, or if they are not so diligent in investigating the other party’s finances at the outset.
If you would like advice regarding Adjudication and Adjudication Decisions, please contact Charlotte Waters at firstname.lastname@example.org or by telephone 0207 993 6960.