SG South Ltd. v King's Head Cirencester LLP & Anor

Adjudicators’ decisions requiring payment should be enforced summarily where jurisdiction and natural justice are not challenged. A party cannot generally avoid payment by relying on a prospective final account or by setting off other disputes.

Fraud may provide a defence where it is a real defence to the adjudicated claim. Any allegation relied upon to resist enforcement must be supported by clear and unambiguous evidence. Fraud previously raised and determined in the adjudication will not ordinarily defeat enforcement. Later fraud may do so where it directly affects the subject matter of the adjudicated decision, but independent fraud or cross-claims generally will not.

A stay may be refused despite the claimant’s financial difficulties where those difficulties existed when the contract was made or were materially caused by the defendant’s failure to pay the adjudicated sums.

SG South Ltd sought enforcement of two adjudicators’ decisions arising from a JCT management contract for construction and refurbishment works at the King’s Head and Corn Hall sites.

The defendants accepted that the adjudicators had acted within jurisdiction and fairly. They argued that enforcement should be avoided or deferred because a final account would soon show that money was due to them, because the claimant had allegedly committed fraud, or because the claimant was insolvent or nearly insolvent.

The central issues were whether the alleged fraud justified resisting enforcement and whether the claimant’s financial position justified a stay of execution.

1. Enforcement. The court gave judgment for the claimant for the sums awarded by both adjudicators. The adjudication decisions were enforceable and there would be no stay of execution.

2. Under the contract, the parties were required to comply with adjudicators’ decisions. A decision requiring payment could not be complied with by withholding payment or asserting a set-off. The approach in Ferson Contractors Ltd v Levolux AT Ltd [2003] BLR 118 and William Verry Ltd v London Borough of Camden [2006] EWHC 761 (TCC) supported enforcement.

3. Fraud could be raised in an adjudication if it constituted a real defence to the claim. To resist enforcement, however, fraud had to be supported by clear and unambiguous evidence. A distinction had to be drawn between fraud which could have been raised and was adjudicated upon, and later-discovered fraud. Later fraud directly affecting the subject matter of the adjudicated decision might be relevant. Fraud on another contract, or an independent cross-claim, generally should not prevent enforcement.

4. The defendants’ allegations were not supported by credible evidence and did not show that either adjudicator’s decision had been procured by fraud. The alleged abatements had been raised in the second adjudication and did not affect the certified sums, particularly because the required notices had not been served. A possible future agreement or arbitration concerning the final account was not a proper reason to defer enforcement.

5. Applying the principles summarised in Wimbledon Construction Company Ltd v Vago [2005] EWHC 1086 (TCC), the claimant’s financial difficulties did not justify a stay. Its financial position was substantially similar to that known when the defendants entered the contract, and its difficulties had probably been materially increased by the defendants’ unjustified failure to pay the adjudicated sums.

6. Payment of the judgment sums and costs was ordered by close of business on 12 November 2009. Interest was payable at 5.5 per cent until that date, followed thereafter by judgment-rate interest.