Welsh council fails in bid to stay execution of £3.3m adjudication

Carmarthenshire County Council has failed in a bid to secure a stay of execution of a £3.3m adjudication.

In Alun Griffiths (Contractors) Ltd v Carmarthenshire County Council [2023] EWHC 2269 (TCC), Mr Justice Pepperall considered a claim by the contractor which sought summary judgment in the sum of £3.3m in order to enforce an adjudicator's decision in its favour against the local authority.

The dispute centred around civil engineering and construction work Alun Griffiths had carried out for the council on part of a road between Swansea and Carmarthen.

The council did not accept that the adjudication decision reflected the true state of the parties' account, and intends to refer the issue of the true value of the works to adjudication.

While the council accepted that Alun Griffiths was entitled to summary judgment, it sought a stay of execution pending the outcome of further adjudication on the grounds that the contractor was insolvent and its parent company's guarantee was inadequate to safeguard the council's position.

Alun Griffiths is a wholly-owned subsidiary of Tarmac Holdings Limited, which is itself owned by CRH plc.

Alun Griffiths recorded a £38m loss in the trading year upon a turnover of £279.9m. As a result of its financial position, the construction company offered a parent-company guarantee from Tarmac.

On behalf of Carmarthenshire counsel argued that cash-pooling arrangements between Tarmac and Alun Griffiths had not been adequately explained. They also claimed that growing liabilities at Tarmac meant that the guarantee offered no better protection than a claim against Alun Griffiths.

But the judge found no merit in the arguments, noting that Tarmac was a "company with a very healthy balance sheet showing a net asset position of £1.5 billion" and was "plainly balance-sheet solvent".

He also found that net current liabilities did "not mean that a company cannot pay its debts as they fall due, but can be an indicator that cash will be very tight and that without careful management a company may be insolvent".

The judge later added: "In any event, the ultimate parent company has a very substantial positive cash position and there is no evidence that it will not continue to support Tarmac's own cash position."

The judge then turned to the question of awarding costs.

It was common ground that Alun Griffiths was entitled to the costs of the enforcement proceedings.

Peter Brogden, who appeared for the firm, argued that such costs should have been awarded on the indemnity basis in view of "unreasonable and obstructive behaviour" by the council.

Mr Justice Pepperall said: "In this case, the council has not defended the enforcement claim and has not resisted the entry of judgment. There are, accordingly, no grounds for ordering it to pay indemnity costs of the claim itself.

"That said, there was no merit whatever in its application to stay judgment. Further, it was unreasonable to a high degree to promise payment in the event that it was provided with a VAT invoice and correct calculation, only then to raise spurious objections to the guarantee provided."

He, therefore, ordered the council to pay the costs of the proceedings.

The costs will be assessed on the standard basis save that the costs of the council's application for a stay will be assessed on the indemnity basis, the judge said.

Adam Carey