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TCC stays proceedings where smash and grab decision remained unpaid

Last week’s judgment in the case of Kew Holdings Ltd v Donald Insall Associates Ltd [2020] EWHC 1862 (TCC) again emphasised the Technology and Construction Court’s position that it will as much as possible give effect to Adjudicators’ decisions and paying parties’ attempts to avoid payment will hold little truck with them.

The Facts

Kew engaged Donald Insall Associates to provide architectural services as part of a project to convert and refurbish The King's Observatory in Richmond to form a private residence.

In 2018, disputes arose between the parties concerning Donald Insall’s entitlement to unpaid fees. Donald Insall commenced a smash and grab adjudication and was awarded just over £200,000.

Kew failed to pay the sums due Donald Insall obtained judgment enforcing the award in February 2019.

Kew again failed to pay the judgment sum and Donald Insall obtained a final charging order over The King's Observatory and sought an order for its sale.

In response, Kew commenced legal proceedings seeking circa £2m in damages alleging, late and inadequate drawings, inadequate advice and overcharging.

Donald Insall applied to have the proceedings struck out, claiming it was an abuse of process in light of the failure to pay the smash and grab adjudication decision and comply with the subsequent court order.

The Decision

The court noted that “The commencement of these proceedings [by Kew] without honouring the adjudication award and the judgment, in flagrant disregard of the "pay now, argue later" regime of the HGCRA, amounts to unreasonable and oppressive behaviour.”

However, the court was mindful of the draconian nature of ordering a strike out legal proceedings and therefore settled upon a stay of the legal proceedings unless and until Kew had paid the sums ordered as a result of the smash and grab Adjudication.

However, the court was also mindful of the draconian nature of striking out proceedings and as a result ordered the stay pending payment of the sums “proceedings to continue would be. The court dismissed the contractor’s application to strike out the proceedings, opting instead to stay the matter until Kew had paid the sums ordered by the court on 5 February 2019. A stay effectively means that court proceedings can’t proceed until a certain act is done.

Comment

Since the Court of Appeal’s decision in Grove v S&T, it has been clear that the paying party in a smash and grab Adjudication must pay the sum ordered before it can commence a true value adjudication over the disputed application for payment.

The TCC has now confirmed that this requirement cannot be circumvented by the commencement of legal proceedings.

For any party involved in Adjudication and the enforcement of Adjudicator’s decisions, this judgment reinforces the view that attempts to avoid compliance with orders of payment of smash and grab adjudications will not be looked upon favourably by the TCC and attempts to do so, will simply add to the cost burden of those parties involved.

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