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锘縏here鈥檚 no point winning an adjudication if the other party can鈥檛 be made to comply with the decision. The robust approach taken by the Technology and Construction Court to enforcing adjudicators鈥� decisions has made it a powerful tool to help companies protect their cashflow - but only if they are still solvent. Although adjudication is a quick, 鈥渞ough and ready鈥� procedure, the court has enforced adjudicators鈥� decisions by granting summary judgment. Judges have felt able to do this because although adjudicators鈥� decisions are binding, they are not final, so a losing party can begin proceedings for final determination of the dispute.

This approach runs into difficulty, however, when it conflicts with the law of insolvency, because the insolvency rules pull the rug out from underneath the assumption that a losing party can always have another day in court. When a company goes bust, it is not possible to bring legal proceedings against it unless permission is granted by the administrator, liquidator or court. Permission is rarely granted, meaning that the decision is binding and final. While judges are comfortable saying 鈥減ay now, argue later鈥� when granting summary judgment, they find it less attractive saying 鈥減ay now鈥� if there is little or no prospect of 鈥渁rgue later鈥� or of the money being recovered, because the winning party is insolvent.

The case of Straw Realisations vs Shaftesbury House illustrates the approach that the Technology and Construction Court takes if an insolvent company seeks to enforce an adjudicator鈥檚 decision. Straw contracted with Shaftesbury to carry out a development in north London for 拢8.5m. The contract provided for disputes to be referred to adjudication and stated that an adjudicator鈥檚 decision would be final and binding, unless one party gave notice within three months of the decision to appeal. Following practical completion in April 2009, two disputes were referred to adjudication in July 2009. The first adjudication was decided in Straw鈥檚 favour, for 拢31,000 on 31 July. On 13 August, Straw went into administration. On 13 October, Straw won the second adjudication and was awarded 拢475,000.

Shaftesbury did not pay, and Straw applied for summary judgment. The judge decided that, because Straw鈥檚 financial position was very different from when it entered into the building contract and was not caused by Shaftesbury鈥檚 failure to pay (Straw had become 鈥渟pectacularly insolvent鈥� with debts of 拢35m), the law is that:

• If the adjudicator鈥檚 decision has not become final, summary judgment will not be granted if the party seeking enforcement is in liquidation or administration
• If the decision has become final, but the party seeking enforcement is in administration, summary judgment may be granted, but subject to a stay.

Straw was granted summary judgment for the first adjudication, because it had become final and binding (Shaftesbury did not issue a notice of intention to appeal in time) but subject to a stay. The judge refused summary judgment on the second adjudication as, for that decision, Shaftesbury had served its notice in time.

Adjudication may be good for keeping cash flowing, but it鈥檚 much less use once you鈥檙e out of cash altogether - there is little difference between having a summary judgment subject to a stay and not being granted judgment at all - either way, no money is immediately forthcoming. This is thin reward, but there is a possible benefit of having a decision backed up by a summary judgment - even if it鈥檚 not what was in mind when starting the adjudication - as it has significant value when the administrator or liquidator comes to set off debts when taking the final account before a distribution of assets.

Hugh Saunders is a solicitor at Fladgate