Proceedings stayed by Head of the TCC due to “unreasonable and oppressive behaviour” by the claimant

Kew Holdings Ltd v Donald Insall Associates Ltd [14.07.20]

Kennedys’ contentious construction team recently succeeded in being granted a stay of proceedings and security for costs in the Technology and Construction Court (TCC) on behalf of the defendant, Donald Insall Associates (DIA) in which DIA was represented by Paul Cowan of 4 New Square.

Head of the TCC, Mrs Justice O’Farrell, ordered that proceedings brought by the claimant be stayed due to a “deliberate and persistent breach” of a previous TCC Court Order and firmly indicated that the courts will defend the “pay now, argue later” adjudication regime set out in the Housing Grants, Construction and Regeneration Act 1996 (the “HGCRA”). She went on to order that the claimant pay £600,000 into court in respect of security for costs due to the claimant being “prepared to disregard orders of this court requiring it to make payments the defendant”.

Stay of proceedings

The claimant, a Cayman Islands registered company, had previously been ordered by the TCC to make payment to DIA for substantial sums owed in respect of unpaid invoices for architectural services at the King’s Observatory, Kew. Kennedys construction team had successfully acted for DIA in these enforcement proceedings, the details of which are set out here. Despite seeking unsuccessfully to overturn the TCC Order at the Court of Appeal, the claimant chose to bring separate court proceedings, thereby seeking to further evade payment.

Commenting on the claimant’s actions in her judgment, Mrs Justice O’Farrell stated that:

The commencement of these proceedings without honouring the adjudication award and the judgment, in flagrant disregard of the “pay now, argue later” regime of the HGCRA, amounts to unreasonable and oppressive behaviour.

As a result, she went on to stay proceedings until such time as the previous TCC Order was paid.  

Security for costs

Mrs Justice O’Farrell then gave her judgment on the parties’ submissions in respect of security for costs. DIA’s application was based on the claimant being resident outside the jurisdiction and there being reason to believe the company would not be able to pay costs if ordered to do so (as per the enforcement proceedings referenced above).

She disregarded the claimant’s submissions that ordering security would risk stifling the claim, given the claimant’s director had provided sworn testimony and evidence proving him to be of “very substantial means”. In her judgment, Mrs Justice O’Farrell found that the claimant Cayman Islands company had inadequate assets to satisfy an order for costs and its director’s offer of a personal guarantee was insufficient because he and his assets were based in Hong Kong.

In considering previous case law on security for costs, she commented that “as explained in Longstaff International Limited v Baker McKenzie [2004] and Holyoake v Candy [2016], the relevant question is whether the company will be able to meet the costs order at the time when the order is made and requires to be met.”

Thereby reiterating that timing of payment was paramount and it was not sufficient that the claimant could pay at some later date. She therefore concluded there was “ample evidence that the claimant can’t pay or won’t pay sums ordered by this court to be paid to the defendant” and ordered that the claimant be required to pay into court the sum of £600,000 within 14 days, or proceedings be stayed.

Comment

This case again shows that the courts will robustly enforce the adjudication regime provided for by the HGCRA and will not look kindly on a party’s attempt to undermine adjudication and its enforcement. It also reiterates the well-established tests regarding security for costs, with a key comment concerning timing of payment when ordered.

If you would like to discuss resolving a construction dispute via adjudication, or want to enforce an adjudicator’s decision, please contact the authors.

Read others items in Construction and Engineering Brief - July 2020

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