Resist enforcement of a smash and grab adjudication – inability to pay

In JRT Developments Ltd v TW Dixon (Developments) Ltd, the TCC has granted the defendant a stay execution of a sum awarded in a smash and grab adjudication until final determination of the defendant’s claim. It is a timely reminder of the difficulties claimants face in enforcing smash and grab adjudications if, despite being solvent, their financial position means they will probably be unable to repay the payment sum if the Court subsequently reversed the adjudicator’s decision.

Factual background

The defendant’s application followed a smash and grab adjudication, in which the claimant, JRT, had been successful. TWD refused to pay the adjudication award. It accepted that JRT was entitled to summary judgment but applied to the court for a stay of execution until final determination of the dispute. JRT’s probable inability to repay the judgment sum, should the court order it to do so at the trial of the main action, was one of the two grounds TWD relied upon.

The court held that in relation to JRT’s inability to repay TWD had shown that was the case.

TWD satisfied the court that the three-stage test, set out in Wimbledon Construction Company v Vago was achieved:

1. It was highly probable that JRT would be unable to pay the judgment sum if ordered to do so. JRT’s total net assets were significantly lower than the judgment sum and there was no evidence that its balance sheet would significantly improve over the next year.
2. The financial position of JRT was substantially different and it now posed a significantly higher risk to creditors compared with when the parties entered into the contract in 2016. As JRT now had substantial debts, two outstanding county court judgments, were repaying creditors via high interest loans, and a very low credit rating; and
3. JRT’s financial position was not due, either wholly or in significant part, to TWD’s failure to pay the sums awarded by the adjudicator. TWD’s payment, at the time of receiving the payment notice, would have merely served to reduce JRT’s interest payments by an insignificant amount.

Previous cases have granted a stay against solvent claimants on this ground before. However, the detailed and comprehensive analysis of JRT’s financial position, before determining the three-stage test in Wimbledon had been satisfied, makes this judgment a worthwhile read. Particularly as it is likely to become a key ground, during the economic downturn, for defendants to successfully stay enforcement of smash and grab adjudications. My colleague, Alexandra Pike, will discuss in a follow-up blog the second ground TWD relied upon – manifest injustice.