Alun Griffiths (Contractors) Limited v Carmarthenshire County Council

Adjudicators’ decisions are ordinarily enforced summarily because adjudication provides a rapid, temporary resolution of construction disputes. A stay may be ordered where special circumstances make enforcement inexpedient, including a real risk that an insolvent claimant could not repay the judgment sum. A sufficient parent-company guarantee may answer that concern. Net current liabilities do not, without more, establish inability to pay debts as they fall due, particularly where group cash-pooling and continuing financial support are evidenced.

Indemnity costs require conduct unreasonable to a high degree. A party may incur standard costs for the enforcement claim but indemnity costs for an unmeritorious stay application and conduct involving a high-degree unreasonable change of position.

Alun Griffiths (Contractors) Limited obtained an adjudicator’s decision requiring Carmarthenshire County Council to pay approximately £3.3 million. The claimant sought summary judgment to enforce that decision.

The council accepted that judgment should be entered but sought a stay of execution pending a further adjudication concerning the true value of the works. It relied on the claimant’s insolvency and argued that a parent-company guarantee from Tarmac Holdings Limited provided inadequate protection. The claimant opposed the stay and sought indemnity costs, alleging unreasonable conduct by the council.

The issues were whether the guarantee constituted sufficient security to defeat the application for a stay and whether the council’s conduct justified indemnity costs.

1. Stay refused. The court applied the principles summarised in Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC 1086 (TCC). Adjudication is intended to provide a quick and inexpensive temporary result, and the successful party should not generally be kept out of its money.

2. The claimant’s accounts showed serious financial difficulty, including substantial losses, net current liabilities and balance-sheet insolvency. Those matters justified scrutiny of the protection available to the council. However, Tarmac had a positive net-asset position exceeding £1.5 billion and was clearly balance-sheet solvent.

3. Tarmac’s net current liabilities did not, by themselves, establish that it could not pay debts as they fell due. Tarmac was a non-trading holding company operating within group cash-pooling arrangements. The ultimate parent had substantial cash reserves, and there was no evidence that it would cease supporting Tarmac. The suggested possibility of a transfer of investments at an undervalue was commercially unrealistic and appeared capable of engaging section 238 of the Insolvency Act 1986.

4. The parent-company guarantee more than protected the council’s position. There were therefore no proper grounds under rule 83.7(4)(a) of the Civil Procedure Rules 1998 for staying enforcement.

5. The claimant was entitled to the costs of the proceedings on the standard basis. The enforcement claim itself was not defended and did not justify indemnity costs. The council’s stay application, however, had no merit, and its promise to pay subject to an invoice and correct calculation followed by spurious objections to the guarantee was unreasonable to a high degree. The costs of the stay application were therefore assessed on the indemnity basis.