Company's experiencing financial difficulty may have trouble enforcing an adjudicator's decision.
In the case of Rainford House Ltd (Rainford) versus Cadogan Ltd (Cadogan) the court was looking at the ability of a company to enforce an un-honoured adjudication decision in its favour, in circumstances where the company was having serious money troubles.

Rainford was employed by Cadogan to build a house in Surrey. A dispute arose which went to adjudication and the adjudicator determined that Cadogan should pay Rainford the sum claimed, over £75 000. Despite this, Cadogan refused to pay and wanted to bring a counterclaim in the courts alleging breach of contract and further that Rainford had, in fact, been overpaid for work already carried out.

The adjudicator's decision
As is normal practice in adjudication, Rainford sought to enforce the adjudicator's decision by summary judgment. However, Rainford was in administrative receivership. The question at issue in the summary judgment application was whether summary judgment should, given Rainford's receivership, be awarded to Rainford at all, thereby forcing Cadogan to pay them the amount of money which the adjudicator said they should pay.

Would it matter if the money went into the ether of Rainford's financial difficulties? The adjudication process is a fast-track dispute resolution method, designed to provide a mechanism to resolve disputes on a binding, but interim basis, allowing the final resolution to follow in good time. Crucially, adjudicator's decisions are binding (except where it can be shown to be out of the adjudicator's jurisdiction, which is fairly hard to prove) and courts often give summary judgment enforcing their decisions.

If the parties wish to take matters further in the courts, they are free to do so. However that does not mean that they can simply ignore the adjudicator's decision. It must be complied with, and only if a court decides the underlying dispute differently, can any money paid over in compliance with an adjudicator's decision be repaid.

So, if Cadogan paid the money which the adjudicator said they owed to Rainford, but then went to trial pursuing its counterclaims and won, Rainford might not be in a position to repay the money due to the fact that it was in administrative receivership. This, argued Cadogan, would be unjust and would effectively remove Cadogan's option to counterclaim for repayment of the money.

...the party defaulting under the adjudicator’s decision need only pay the money due into court, or not at all, until a court decides the final outcome...

The court's decision
Judge Richard Seymour QC held that Rainford were entitled to summary judgment of the adjudicator's decision but he granted a stay of execution pending trial of Cadogan's counterclaim, provided that they paid the money due into court, rather than to Rainford direct.

Although Rainford were awarded their summary judgment, they could not have access to the money because of the stay. The judge said that whether or not a stay should be granted depended on the facts of each case. But in order to obtain a stay, the defendant must at least provide credible material which, unless contradicted, demonstrates that the claimant is insolvent.

In this case, Judge Seymour said that "if there is a substantial chance, demonstrated by objective evidence, such as the making of a winding-up order, or the appointment of a receiver, that money of which the obligation to pay is actually disputed … will, if paid, for practical purposes be lost, it seems to me that that is a circumstance which … ought to be considered on any application for summary judgment."

However, he did go on to say that "vague fears or unsubstantiated rumours of insolvency will not merit much attention, but evidence that some third party has taken action which puts the continued financial viability of the claimant at hazard must, I think, be evaluated seriously."

Thus, real, credible evidence of the claimant's insolvency is needed, and administrative receivership may well constitute such evidence.

So what difference does this all make?

To go back to the original question posed at the beginning of this article, it seems that if a company in financial difficulties wishes to enforce an adjudicator's decision, they may well have problems in obtaining payment of the sum awarded direct to themselves.

Even if they are granted summary judgment, there is the possibility that a stay of execution will be made which provides that the party defaulting under the adjudicator's decision need only pay the money due into court, or not at all, until a court decides the final outcome on the matter in dispute.