Misleading statements on financial position result in stay of adjudication enforcement (Pioneer Cladding v John Graham Construction)

Dispute Resolution analysis by Luke Wygas, barrister at 4 Pump Court Chambers.

Coulson J in the TCC has stayed enforcement of an adjudication award based on the financial position of the enforcing party, as he had real concerns about the evidence provided by that party, as to its financial position.

Practical implications

Pioneer Cladding v John Graham Construction  [2013] EWHC 2954 (TCC)

This judgment demonstrates that the TCC will stay enforcement even when there is a dispute as to fact. It also highlights the importance of careful witness evidence so as to avoid any impression of omitting facts or misleading the court.

Court details

  • Court: TCC, Queen's Bench Division
  • Judge: Mr Justice Coulson
  • Date of Judgment: 4 October 2013

Facts

Yuanda v WW Gear [2010] EWHC 720 (TCC), 130 ConLR 133

Pioneer sought to enforce an adjudication award in its favour. There was no substantive dispute as to enforcement, save for a short contractual point on the payment of the adjudicator's fees (a contract term was found to be unenforceable in line with Yuanda and connected case law).

Coulson J did have to consider, however, what he called a 'novel' point as to whether execution of the award should be stayed.

What impact will misleading statements have for enforcement of an adjudication decision?

Wimbledon Construction v Vago [2005] EWHC 1086 (TCC)

Coulson J repeated his previous summary of the position, provided in Vago, that a stay may be appropriate where a claimant would not be in a position to repay the sums if unsuccessful at a substantive trial. However, it will not be appropriate if:

  • the claimant's position is the same as it was when the contract was formed, or
  • the claimant's financial position is due in whole or in part to the defendant's failure to pay the adjudication award

Misleading statements as to past financial position

Pioneer argued that its financial position was broadly unchanged since it entered into the contract with Graham, referring to its accounts to November 2011 and to November 2012. Both sets of accounts showed limited assets.

Graham argued that it was more appropriate to look at the information that Pioneer had been provided at the time of contract. That information included suggestions that Pioneer had been involved in various 'glitzy' projects, which had really been carried out by a predecessor company, and the implicit suggestion that it had £150,000 in the bank.

While some of the evidence was contested, Coulson J was willing to find for the purpose of the application that misleading and incorrect statements had been made by Pioneer, and that Graham had entered into the contract on a false premise. Accordingly, even though Pioneer's financial position may not have changed since the time of contract, this did not prevent a stay from being appropriate.

Misleading statements as to the current situation

Pioneer also argued that its financial difficulties were caused by Graham's failure to pay. There were county court judgements against it of £61,440, but the adjudication award of £188,665 would have prevented them from arising.

Coulson J refused to take such a 'mathematical' approach to the question, and considered the evidence given by Pioneer as to its other projects. He found that the evidence given was in parts 'entirely misleading' and that Pioneer's performance on its other contracts was 'nothing short of calamitous'. It had financial problems that extended beyond the non-payment of the adjudication award and accordingly Graham was not to blame for its financial position. There was also a question as to whether Pioneer was even engaged on one of the contracts mentioned.

Accordingly, Coulson J stayed the execution of the adjudication award.

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