VA Tech WABAG UK Limited v Morgen Est (Scotland) Limited 1

The fact that the pursuer (claimant) could have proceeded to adjudication to recover sums due to it did not prevent the Court granting an interim injunction to stop the defenders hindering the release of funds from a joint account.

Opinion of Lord Drummond Young, Outer House, Court of Session

30 May 2002

V and M were part of a construction consortium to design, procure and construct a sludge treatment plant. Payments for the work were made into a joint account. M claimed that it had carried out ancillary services which were part of V's share of the works and proposed certain adjustments to the payment due under two payment certificates. V disputed this, and M refused to consent to or assist in the distribution of monies to V from the joint account in respect of the two certificates.

V applied for declarator (declaration) that M was not entitled to do this save in respect of contractually provided adjustments, which did not apply. M argued that wider construction of the word 'adjustment' in the Consortium Agreement included the subject matter of the dispute. V also sought interdict (injunction) and interim interdict of M from preventing or hindering the release of the monies due to V. M requested recall of an earlier interim interdict. Further, V applied for an order that M consent to and assist in the transfer of monies due to V from the joint account since it was entitled to prompt payment, and the balance of convenience was relevant in the commercial context of large-scale construction contracts, where cash flow was critical. M argued that V could have referred the matter to adjudication to obtain a rapid decision, so the balance of convenience should favour M.

The Judge considered the interpretation of the term 'adjustment'. He agreed with V that V had a right to enforce payment as none of the variations outlined in the Construction Contract which would prevent this had been made. The Judge then had to decide if the balance of convenience favoured the continuation of the earlier interdict.

The Judge weighed up various factors relating to the balance of convenience and decided to grant the interdict. The Judge noted that the adjudication provisions of HGCRA together with the payment provisions in section 109-113 clearly recognised that cash flow was the life blood of the construction industry. While, in some circumstances, the fact that a party could refer disputes to adjudication for a quick resolution might be relevant to the balance of convenience, it was not sufficient here given other factors such as the strength of the respective cases.

The fact that the pursuer (claimant) could have proceeded to adjudication to recover sums due to it did not prevent the Court granting an interim injunction to stop the defenders hindering the release of funds from a joint account.