Malin Industrial Concrete Floors Limited (in administration) v Volkerfitzpatrick Limited

Insolvency does not create an automatic bar to enforcement of an adjudication award. The court must balance the adjudication regime against the insolvency regime and any real risk that enforcement will deprive the responding party of security for a cross-claim.

A cross-claim must be supported by evidence raising it above the level of a bare or fanciful claim. Where the adjudicator has not determined the merits and net balance of the cross-claim, the adjudication award remains provisionally enforceable. The court may grant summary judgment but stay enforcement. The stay may be conditional on the responding party producing prima facie evidence of liability and damages capable of extinguishing the award.

The claimant sought summary judgment to enforce an adjudication decision requiring payment of approximately £59,950 plus interest, VAT and the adjudicator’s fee. The claimant was in administration. The defendant initially challenged enforcement on jurisdictional and natural justice grounds, but abandoned that challenge.

The remaining issue was whether enforcement should be refused or stayed because the defendant alleged a substantial cross-claim for defective flooring, together with the loss of security for that cross-claim if the retention were paid. The claimant argued for judgment followed by a short stay to allow the defendant to commence a Part 7 claim. The central issues were whether the cross-claim was sufficiently substantial, whether it had already been determined by the adjudicator, and how the insolvency context affected enforcement.

1. Summary judgment and stay. Summary judgment was granted, but enforcement was stayed pending further order. The claimant was permitted to apply to lift the stay.

2. Sufficient cross-claim. The defendant had produced evidence of cracks, repairs and possible workmanship-related causes. That evidence raised the cross-claim above a bare or fanciful allegation. Expenditure on repairs did not, however, establish liability, because the evidence also identified possible extraneous causes.

3. Adjudicator’s decision. The adjudicator had determined the contractual final position and the retention. He had not adjudicated the merits of the alleged defects or calculated a net balance after taking the cross-claim into account. The exception discussed by Lord Briggs in Bresco therefore did not apply.

4. Insolvency considerations. Enforcement must give way to the insolvency regime where there is a conflict. Before any notice of distribution, statutory insolvency set-off had not prima facie crystallised. Nevertheless, the claimant’s administration, the absence of security and the evidence of insolvency created a real risk that payment would deprive the defendant of the retention as security for its cross-claim.

5. Discretionary protection. A complete refusal of judgment was not required. The underlying pay-now-argue-later purpose of adjudication justified requiring the defendant to do more than establish a real prospect of a cross-claim. Within three months of the order, the defendant had to provide prima facie evidence supporting a likelihood of sufficient liability and damages to extinguish the award. If only partial set-off was supported, the parties were expected to agree the appropriate level of enforcement.