Tony Bingham - An adjudicator has told you to pay money to a firm veering towards insolvency, against which you have a counterclaim outstanding. Must you pay?
Rainford House was the builder on a scheme in posh Weybridge, but soon fell into a quarrel with its customer, Cadogan. Rainford called for the adjudicator, and Mark Pontin was appointed. He decided that Cadogan should pay Rainford £75,000. Cadogan was ready to stump up the cheque. It didn't necessarily agree with the result, but its lawyers explained the binding effect of the decision and that there wasn't a snowball's chance in hell of resisting enforcement.

By now the works were said by Cadogan to be running late. Then the pool contractor pulled off site, and the plasterer, and the roofer. These chaps told Cadogan that they had stopped because they hadn't been paid. Mind you, that might have been because Rainford hadn't been paid – who knows? Cadogan began to fret about paying over the £75,000 to then find that Rainford was bust, and the vicious circle was complete. An observer might justifiably speculate that if the £75,000 wasn't paid, Rainford probably would go bust.

Cadogan made up its mind about two things. The first was quite right: it is that adjudication is not a highfalutin' trial in wigs and gowns. It is simply an inquiry on limited evidence at an instant in time about the rights of the parties, which results in an interim ruling and decides who should hold the money until the dispute is resolved. Adjudication is getting deeper into a legalistic, rule-dogged drama and losing its way.

Cadogan's second decision was that it would not pay. So Rainford had to begin enforcement proceedings, going to the High Court for instant judgment to order Cadogan to comply (Rainford House Ltd vs Cadogan Ltd [February 2001]). Cadogan's barrister did not try to say that Pontin's decision was not binding. Instead he said that since Rainford had just gone into administrative receivership and since Cadogan had a claim pending against Rainford, the court should not give summary judgment. It should let Cadogan hold on to the money.

An observer might justifiably speculate that if the £75,000 wasn’t paid, Rainford probably would go bust

Put it this way: since adjudication is merely a temporary decision, it is open to Cadogan to bring the dispute to a traditional forum such as a court or arbitration for a final decision. That final leg would be hopeless if Rainford had received the £75,000 but was in receivership, because the money would be allocated to all the creditors. Cadogan might win in court but just be a creditor hoping for a pay-out.

In Bouygues vs Dahl Jensen, the Court of Appeal explained what might apply to adjudication moneys when the payee was in liquidation. Insolvency rules stepped into the relationship and would not order money to be paid over until the net position between the parties' claims and counterclaims was ascertained. But insolvency rules applied to a company in liquidation rather than receivership.

Cadogan's barrister tried again. He pointed to the Rules of the Supreme Court (Order 47) which empower the court to give enforcement but to order a stay of execution if special circumstances render it expedient. The snag with this is that the judge cannot ignore what parliament says about adjudication. The court must obey parliament's intention, and so adjudication is binding on the court. The judge explained that the Construction Act is all about the contractual rights of parties that are solvent. The adjudicator decides who should hold the disputed money, pending resolution of the dispute. It is not a final process. It is merely provisional, and capable of being reversed once finally examined. Nothing in the act reallocates the risk of having to endure the consequences of a trading partner becoming insolvent.