Injunction granted pending compliance with an earlier judgment

Mentmore Towers and others v Packman Lucas

(Queen's Bench Division — Technology and Construction Court — 16 March 2010)

Insurers sometimes have to defend serial litigation and it can come as a surprise that the courts allow parties to pursue a claim when they have not paid sums awarded in a previous one.

In this case, the defendant was successful in halting proceedings pending compliance with an earlier judgment.

Packman Lucas, a firm of engineers, initiated adjudications against the claimants for fees and won. The court entered judgment on the adjudicator's decisions, but the wealthy claimants did not pay. Instead, they issued court proceedings alleging that Packman Lucas had already been overpaid. They were entitled to do so because construction adjudication decisions are only temporarily binding. But did they have to pay first?

Packman Lucas thought so and asked the court to halt proceedings pending payment. The judge said the power to halt proceedings should be used sparingly and in exceptional circumstances, but was appropriate in this case because the claimants had acted oppressively and unreasonably and there were "some elements of bad faith" in their pursuing claims, which he described as "at best exaggerated".

Not to be deterred, the claimants referred their claims to adjudication. Packman Lucas applied for an injunction to halt those proceedings. By this stage, the claimants had obtained expert evidence and reduced the sums claimed so the "bad faith" was cured. Even so, an injunction was granted.

Comment

In an adjudication for professional fees, a counterclaim (whether on the basis of an overpayment or a negligence claim) can only be used as a defence if a valid 'withholding notice' has been served within the prescribed time after the invoice(s) were issued. This can lead to subsequent claims, which insurers may have to defend. This case may be relied on in arguing that such claims cannot proceed until any sums awarded have been paid, reducing the incentive to pursue them. In a broader context, this case adds to the body of case law on when proceedings will be halted pending compliance with a judgment. It appears to demonstrate that bad faith is not a pre-requisite for granting a stay, something on which previous cases were conflicting. It also confirms that the parties' financial positions will be important. A party that can pay — but chooses not to — will have some explaining to do. Peter Stockill, BLM London — BLM acted for the defendant in this case

The following law report contributed by specialist insurance practice Berrymans Lace Mawer (www.blm-law.com) first appeared in Post Magazine on 27 May 2010.

Disclaimer: The law report contains information of general interest about current legal issues, it does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. Specialist legal advice should always be sought in any particular case.