Baldwins wheeled in the adjudicator when Barr refused to pay £150,000 to repair a jiggered crane. The adjudicator ordered Barr to fork out the cash. Barr refused again, so Baldwins sought the assistance of the High Court. Just before enforcement proceedings were heard, Baldwins went into receivership.
Two useful points arose from the enforcement hearing, and I am much obliged to Vijay Bange of Pinsent Curtis Biddle (Baldwins' solicitor) for forwarding me the judgment in Baldwins Industrial Services Plc vs Barr Ltd.
The two points are: that this is the first case (to my knowledge) where a court has pronounced on whether a plant-hire contract is a construction contract, such that the Construction Act applies and either party can unilaterally call for the adjudicator. The second point is the controversial and increasing willingness of judges to order that money be paid into court, so defeating the adjudicator's decision. This case is likely to go to the Court of Appeal, I am told, so the commentary here will be benign.
Point one: Is the hire of a crane the type of construction contract defined by the Construction Act? Both parties agreed that the answer was no if it was mere hire. But if it was hire of plant and driver, Baldwins said, it was within the scope of the act. Barr disagreed. Baldwins' position was that the well known model conditions of hiring plant apply to this contract; they are the Construction Plant-hire Association standard form. The latest CPA conditions include adjudication as standard, but at the time the football stadium was being built, they did not. In any case, said Barr, the contract didn't specify that Barr was to use the crane on construction work. Moreover, the inclusion of a driver was irrelevant.
Controversially, if the payee is in receivership, or just a very small firm, the money may be paid into the court and frozen
The judge rejected that line of argument. Previous cases, albeit to do with health and safety, have made a distinction between the hire of a crane alone and the hire of crane and driver. Also, it was Barr's intention to use Baldwins' driver to operate the crane to conduct building operations. The contract therefore complied with section 105 (e) of the Construction Act, and Baldwins did have a right to call for the adjudicator.
Once that point is decided, the law of the land is simple. It is this: an adjudicator's decision can be undone by subsequent trial, but until then it creates binding legal rights. So, the party in whose favour an award is made is entitled to enforce it. The whole purpose of the act was to improve cash flow in our industry – and this would be wholly frustrated if valid awards were not enforceable. But the act is silent on cases where the winner may be unable to repay if the eventual court case goes against it.
Frequently, in court proceedings for enforcement, the payer will argue that if the order of the adjudicator is obeyed, the money is likely to disappear into a black hole. For example, if the payee is in receivership or liquidation, it is highly unlikely that it will be able to repay. So,the money is paid to the court and frozen. This is even happening when the payee is not insolvent but rather a very small business with little or no balance sheet to speak of.
In these cases, the court uses its discretion under the civil procedure rules to block payment. It asks if special circumstances point to a risk of inability to repay. Put another way, the court is adding a gloss to the Construction Act, which one can only assume escaped parliament's thinking. (The Insolvency Act applies when the payee is in liquidation; this was not the case here, so the adjudicator's decision was not trumped.)
Finally, the court agreed that the costs of the adjudication were to be paid out and were not to be the subject of a stay.
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or email him on email@example.com.