PBS Energo A.S. v Bester Generacion UK Ltd

An adjudicator’s decision should ordinarily be enforced promptly. Allegations of fraud cannot resist enforcement where they were, or reasonably should have been, raised in the adjudication. However, enforcement may be refused where the decision was arguably procured by later-discovered fraud, or materially relied on evidence which is arguably fraudulent.

A defendant facing an accelerated summary-judgment enforcement application need not first plead a defence. CPR rule 24.4(2) permits the fraud case to be raised without a defence, provided it is properly evidenced. Where material fraud is arguable, the usual course is to refuse summary judgment rather than enter judgment and grant a stay. A final judicial determination of the underlying dispute supersedes the adjudicator’s temporary decision.

The appellant subcontractor obtained two adjudication decisions arising from the termination of an engineering, procurement, construction and commissioning subcontract. The first adjudicator decided that the appellant had validly terminated the subcontract. The second assessed the resulting net liability at £1,701,287.22.

The respondent resisted the appellant’s enforcement application. It contended that representations about valuable plant being held for its order were false and had materially affected the second adjudicator’s rejection of its mitigation argument. Pepperall J refused summary judgment, holding that there was an arguable case that the decision had been procured by fraud which could not reasonably have been discovered during the adjudication: [2019] EWHC 996 (TCC).

The appellant appealed on the procedural question whether fraud had to be pleaded before the enforcement hearing, and on whether summary judgment should instead have been granted subject to a stay. During the appeal, Cockerill J finally determined the substantive termination dispute in the respondent’s favour: [2020] EWHC 223 (TCC).

Appeal dismissed unanimously. Coulson LJ, with whom Rose LJ and Sir Timothy Lloyd agreed, upheld the refusal to enforce the adjudicator’s award.

1. The court reaffirmed the distinction governing fraud in adjudication enforcement. A fraud allegation which was raised in the adjudication, or which could and should reasonably have been raised there, does not prevent enforcement. The adjudicator is treated as having considered it. Conversely, where the decision was arguably procured by fraud, or materially relied on evidence shown to be arguably fraudulent, the allegation may resist enforcement if it could not reasonably have been raised during the adjudication. That approach respects the rapid, temporarily binding nature of adjudication while preventing the court’s process from facilitating fraud.

2. The judge had been entitled to find that the alleged false representations about the availability, ownership and storage of plant were material to the adjudicator’s rejection of the respondent’s mitigation case. He was also entitled to find that the alleged fraud could not reasonably have been discovered before the adjudication ended. The evidence emerged from extensive disclosure in the parallel proceedings, much of it without English translation.

3. CPR rule 24.4(2) meant that the respondent was not required to file a defence before the summary-judgment hearing. The accelerated TCC procedure presupposes that position and does not modify it. A defendant may therefore raise a properly evidenced fraud case in witness evidence and submissions without first pleading it. The serious nature of fraud allegations remains protected by the professional duties requiring reasonable grounds and credible material.

4. Given the arguable, material fraud, the judge was entitled to refuse summary judgment altogether. It was not appropriate first to enter judgment and then stay execution. Severance was neither available nor advanced. Independently, Cockerill J’s final determination that the appellant had not validly terminated the subcontract superseded both adjudicators’ temporary decisions. It would therefore have been wrong in principle to enforce the second decision in any event.

• Court of Appeal (Civil Division): dismissed the appellant’s appeal and upheld the refusal to enforce the adjudicator’s decision: [2020] EWCA Civ 404.
• High Court, Technology and Construction Court: Pepperall J refused summary judgment to enforce the adjudicator’s award because there was an arguable case that it had been procured by fraud discovered only after the adjudication: [2019] EWHC 996 (TCC).
• High Court, Technology and Construction Court: in parallel final proceedings, Cockerill J determined the underlying termination dispute in the respondent’s favour, which superseded the adjudicators’ temporary decisions: [2020] EWHC 223 (TCC).