SAMSUNG C&T CORPORATION UEM CONSTRUCTION JV SDN BHD v EVERSENDAI CONSTRUCTION (M) SDN BHD

Case Significance

Illustrates that a stay of an adjudication decision under section 16 of CIPAA will be refused where the successful party is financially sound and no special circumstances, such as a real risk of inability to repay, are established.

This High Court (Construction Court) decision concerns an application to stay an adjudication decision and related proceedings under the Construction Industry Payment and Adjudication Act 2012 (CIPAA), heard together with the connected setting-aside and enforcement applications. In this Originating Summons the party against whom the adjudication decision had been made sought, under section 16(1)(b) of CIPAA, to stay the proceedings — including any winding-up proceedings and payments under section 30 — until the final disposition of the dispute in a pending arbitration. A stay under section 16 is not granted as of right; the applicant must establish clear grounds, such as that the adjudication decision has been challenged and that there are special circumstances, often bound up with the financial standing of the party who won the adjudication and its ability to repay the adjudicated sum if the arbitration ultimately goes the other way. The court considered competing independent reports on the claimant's financial capacity — one commissioned on each side — and, comparing them, found on a balance of probabilities that the claimant's group had substantial projects, that its holding company was finalising a financial restructuring plan to improve cash flow, and that the group's independent auditors had expressed no going-concern doubt, so that the claimant did not pose an insolvency risk or an inability to repay the adjudicated sum. Concluding that the claimant was not impecunious and that no special circumstances justified a stay, the court dismissed the stay application, together with the setting-aside application, with costs, while granting the claimant's enforcement application. The judgment illustrates that a stay under section 16 of CIPAA will be refused where the successful party is financially sound and no special circumstances are shown. The court's approach reflected that a stay under section 16 is the exception rather than the rule, since the statutory purpose of adjudication would be defeated if a successful claimant were routinely kept out of its money pending a lengthy arbitration; the paying party must therefore point to concrete evidence of a real repayment risk before a stay will be granted.