Westshield Limited v Mr David Whitehouse and Mrs Lisa Whitehouse [2013] 3576 EWHC (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-lawnow.com/adjudication

Judgment date: 18.11.2013


The fact that the claimant in an adjudication had entered into a Company Voluntary Arrangement (“CVA”) was not a bar to adjudication as such. Where, however, the CVA provided for an account to be taken of mutual credits and debts as between the parties with only the net amount (if any) admitted to proof in the CVA, the Court would not give summary judgment for the amount of the adjudicator’s award.

Technology and Construction Court, Mr Justice Akenhead


In August 2007, Mr and Mrs Whitehouse employed Westshield to carry out substructure works to their house for a contract sum of £262,074.07. The works were due to complete by 18 January 2008 but overran and completed around April 2009. The contract provided for adjudication for disputes or differences arising under the contract.

By the end of 2010, and whilst there were ongoing issues between the parties, Westshield encountered financial difficulty and entered into a CVA under the Insolvency Act and Insolvency Rules 1986. This came into effect on 7 December 2010 and involved the appointment of Supervisors to administer its terms. The arrangement included standard provisions for a CVA. These included the following: 

20 (b) Westshield would continue its business on its own account and in its own name;
23 (c) (ii) no creditor would be entitled to receive any payment under the CVA unless the Supervisor had admitted his claim;
23 (e)  where before the CVA was approved there had been mutual credits, mutual debts or other mutual dealings between the Company and any person claiming to be a creditor of the Company, an account would be taken of what was due from each party to the other in respect of the mutual dealings and the sums due from one party would be set off against the sums due from the other. Only the balance (if any) of the account owed by the Company to the creditor would be claimable by the creditor;

23 (f)  in the event of the claim of any creditor being rejected by the Supervisor, the creditor would have the right of application to the Court on the admissibility or otherwise of such claim but any such application had to be made within 21 days of the creditor receiving a written statements from the Supervisor of his reasons for rejecting the claim.

The list of creditors at this stage did not include Mr and Mrs Whitehouse. In May 2011 Westshield claimed that over £270,000 was due from Mr and Mrs Whitehouse (taking into account approximately £371,000 already paid) and on the 6 March 2013, Westshield served on Mr and Mrs Whitehouse a Notice of Adjudication claiming a total of £279,956 together with other relief.

In the adjudication Mr and Mrs Whitehouse challenged the Adjudicator on grounds of jurisdiction stating that they had a substantial counterclaim against Westshield and raising the point that Clause 23 of the CVA conditions meant that it was in fact for the Supervisor to address the extent of the mutual dealings between the parties.

The Adjudicator indicated that he believed he had jurisdiction. He found in favour of Westshield and decided that Mr and Mrs Whitehouse should pay Westshield £132,667.56 inclusive of interest and pay his fees. Mr and Mrs Whitehouse paid the Adjudicator’s fees but did not pay Westshield. They did however launch a claim as a creditor under the CVA by lodging a proof of debt with the Supervisor for a net amount of approximately £200,000, based upon alleged defective work by Westshield and alleged errors in the Adjudicator’s decision.

Westshield issued proceedings seeking to enforce the Adjudicator’s decision as binding, relying on Section 108 of the Housing Grants, Construction and Regeneration Act 1996. Mr and Mrs Whitehouse argued that by reason of the CVA there was no subsisting basis for adjudication and that, even if the adjudication decision was binding, it simply established a debt but the CVA arrangements applied to enable the counterclaim to be deployed and the Supervisor had to deal with that first. Finally they argued that there should be a stay of execution due to Westshield’s poor financial position.


The Court was asked to decide: 

  • whether Mr and Mrs Whitehouse had a bona fide counterclaim;
  • whether the Adjudicator had had jurisdiction to decide Westshield’s claim;
  • whether summary judgment should be given for the amount of the Adjudicator’s decision given that Westshield had entered into a CVA;
  • whether, if cross-claims existed between to the two parties under the CVA, the decision of the Supervisor in considering them took precedence over the Adjudicator’s decision;
  • whether there should be a stay of execution.


The Court dismissed the application for summary judgment and held that:

  • Mr and Mrs Whitehouse had raised, albeit belatedly, sufficient evidence to assert that they had some sort of bona fide counterclaim for defects and some at least partial challenge to the detail of the Adjudicator's decision. Although there were discrepancies, inconsistencies and some lack of substantiation in what had been raised, it could not be said that, if an account was taken of the financial position as between them and Westshield, there would definitely not be some credit to them.
  • As a matter of jurisdiction, the existence of the CVA did not act as a bar on adjudication which prevented Westshield from pursuing adjudication for a pre-CVA debt and the Adjudicator was right to disregard it as a valid challenge. The impact of the CVA may have been a defence in the adjudication but it was never argued as such by Mr and Mrs Whitehouse.
  • Both Westshield and Mr and Mrs Whitehouse (as arguable creditors) were bound by the terms of the CVA, in particular Condition 23(e). In those circumstances the Adjudicator’s decision would not be enforced as it was for the Supervisor to take an account of the sums due as between the parties under Condition 23(e). If that accounting exercise showed money due to Westshield, that could be paid, subject to the right which Mr and Mrs Whitehouse had under Condition 23(f) to refer the matter to the Court. If the Supervisor’s accounting exercise showed money due to Mr and Mrs Whitehouse they would receive however many pennies in the pound as were available to creditors under the CVA. 
  • In the circumstances the question of a stay of execution did not arise but the Court would have refused a stay as it was clear that the pre-CVA losses or deficits would largely be wiped out when Westshield emerged in a few weeks' time from the CVA and Westshield currently had a strong order book.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-lawnow.com/adjudication

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