Avanton sought summary enforcement of an adjudicator’s decision. The parties had previously entered into a design and build contract under which LUC constructed three industrial units at Culvert Court. Practical completion was certified on 10 April 2025, after which disputes arose over the final account.
In May 2026, LUC commenced seven adjudications before seven different adjudicators, concerning different aspects of valuation. Avanton subsequently commenced its own adjudication, alleging that LUC had failed to serve a valid payment or pay less notice against a notified sum of £1,877,640.25.
Three of the LUC adjudications led to decisions that Avanton’s contra-charges were overstated by an aggregate of £710,264. Nevertheless, the adjudicator in the Avanton referral decided that LUC must pay the notified sum, interest and adjudicator’s fees. The remaining four adjudicators subsequently resigned.
LUC sought a stay on three connected grounds: (i) Avanton’s probable inability to repay; (ii) a deterioration in Avanton’s financial position since entering into the contract; and (iii) manifest injustice if enforcement forced LUC to cease trading and prevented it from pursuing arbitration. LUC also relied on the favourable valuation decisions and its contention that it would ultimately be the net receiving party.
Constable J applied the Wimbledon Construction Company 2000 Ltd v Vago principles (see Dispatch, Issue 61), and also referred to the case of AWG Construction Services v Rockingham Motor Speedway [2004] EWHC 888, where the judge had commented that:
“In general a court must balance (a) the intention of the legislation that adjudication should be enforced summarily; (b) the right of the successful party not to be prejudiced by being kept out of its money; and (c) in cases where there is a serious risk that the party will not be able to recover the money, that the defendant is not being seriously prejudiced in a way not contemplated by the Act which is silent as to the position where a defendant runs more than a nominal risk of being unable to recover money after trial or arbitration award.”
The judge here noted that LUC’s reliance on its own inability to pay the ordered notified sum was unusual. However, a defendant’s own inability to pay can exceptionally be relevant, but financial difficulty alone is not ordinarily sufficient grounds for a stay. Otherwise, impecunious defendants could routinely avoid enforcement. The judge emphasised that an applicant such as LUC must show that it was unable to pay and address whether funding could realistically be obtained from shareholders, associated persons or other sources.
Constable J referred to the case of J&B Hopkins Ltd v A&V Building Solution Ltd [2023] EWHC 2475 (TCC) where Roger Ter Haar KC, sitting as a Deputy High Court Judge, had found it “clear beyond doubt that A&V itself cannot afford to pay“, and that family and friends had made loans to A&V, that the funding had since , and that the owner had exhausted all other obvious sources of finance. There was therefore an inability to pay. The judge in that case went on to exercise his discretion to stay the judgment in circumstances he described as “exceptional”, including the conduct of the judgment creditor in exacerbating the debtor’s financial difficulties, the judgment creditor’s own failure to pay an earlier adjudicator’s award, and concerns about the merits of the decision sought to be enforced. Constable J agreed that whilst it will be rare for a defendant’s impecuniosity, of itself, to play a material part in the exercise of discretion, a court may do so in exceptional circumstances where it gives rise to a risk of manifest injustice.
Where there were finely balanced competing risks of injustice arising either out of an inability to repay (on the part of the claimant) or to pay in due course (on the part of the defendant), the judge considered that the court should favour what would be the ordinary course – namely, enforcing the judgment.
Avanton was a Single Purpose Vehicle (“SPV”) set up for the purposes of developing Culvert Court. Its financial position depended principally on the property, secured borrowing and group support. Constable J accepted that, on the available evidence, there was a negligible cash position, substantial secured borrowing and negative historical net assets. Avanton was plainly reliant upon discretionary third-party funding which might be removed at any stage. This supported a conclusion that Avanton might not be able to repay the sum in due course if the adjudicator’s decision was reversed in arbitration. However, LUC had not established that Avanton would not repay following arbitration. The burden on LUC was to establish probable, rather than possible, inability to repay, not merely a material risk of non-payment. For example, in this case the evidence and accounts did establish that substantial group funding had historically been made available to Avanton during the development. There was direct evidence that, whilst not guaranteed, this would continue.
Was there a change in Avanton’s financial standing? The judge thought not; Avanton’s standing was always and remained uncertain. LUC had always understood that Avanton was an SPV with limited assets. Therefore, LUC had not shown that Avanton’s accounting position represented a materially different repayment risk from that which LUC had knowingly accepted at the date of contracting.
As for LUC, it was accepted that LUC would not be able to pay the judgment without recourse to raising funds. However, the evidence did not address in any way what money, if any, could be raised from other sources. This was fatal to LUC’s position as the evidence advanced by LUC, in the view of the judge, fell far short of what was required to establish an inability to pay or that its intention to pursue the arbitration to recover some or all of the sums forming part of the adjudicator’s award would be stifled. In the absence of such a finding, it was not possible to conclude that refusing a stay would result in manifest injustice.
Summary judgment was therefore entered on behalf of Avanton.