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Adjudication
under the Housing Grants Construction and Regeneration Act 1996 had
to be enforced by a court judgment or agreement before liability under
an insurance policy could be established for the purposes of a claim
under the Third Parties (Rights Against Insurers) Act 1930.
The claim
arose out of a construction project. An adjudication was given under
The Housing Grants and Regeneration Act 1996. The adjudicator decided
that the consulting structural engineers, who had gone into voluntary
liquidation a few months earlier and who were insured by the defendant,
were liable to the claimant, Galliford, the main contractor on the project.
Galliford did not seek to apply to the court to enforce the adjudication
award.
Galliford
contended that the adjudication award itself was sufficient to enable
the insured to claim an indemnity from the insurer under the policy.
The insurer submitted that Galliford must take steps to enforce the
adjudication award, and that until that was done the liability of the
insured was not established with the result that its rights under the
1930 Act were not transferred. Galliford alleged that the effect of
the resolution for voluntary winding-up was to transfer and vest in
it the engineers' rights to be indemnified against any liability arising
from the claim.
The court
held that the adjudication award gave rise to an immediate payment obligation
that could be enforced through the courts. It created a contractual
obligation on the insurer to pay the claimant but it was not an absolute
obligation. It would not be enforced by the court if the adjudicator
had exceeded his jurisdiction. Liability under the policy was not therefore
established until the adjudication award was enforced by a judgment
of the court or agreement.
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