Alexander & Law Ltd v Coveside (21BPR) Ltd EWHC 3949 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

Judgment date: 12.12. 2013

SUMMARY


(1) The existence of a Winding-Up Petition in relation to a company in whose favour an adjudication award had been issued is not an automatic defence to an application for summary judgment enforcing the award. (2) The court dealing with the application for summary judgment will not reach a decision in advance of the hearing of the Winding-Up Petition as to whether or not the company is insolvent. (3) In this case the Court found that the financial condition of the Claimant showed that there was a high risk that the Claimant would be unable to repay the amount of the Adjudicator’s award at the time when any repayment would be due to be made, and that the financial condition of the Claimant was not due in any significant part to the failure of the Defendant to pay the sums found due by the Adjudicator. (4) Therefore, the Court granted summary judgment to the Claimant, but stayed the proceedings until after the resolution of all disputes between the parties.

Technology and Construction Court, Mr. Justice Coulson:

BACKGROUND
 
In May 2011 Alexander & Law Ltd (“A&L”) were engaged by Coveside (21BPR) Ltd (“Coveside”) to carry out extensive works at Coveside’s development at 21, Buckingham Palace Road. It appears that, by March 2013 at the latest, A&L were in financial difficulties. On 25 March 2013 Coveside terminated the contract and A&L ceased trading not later than that date.

In June 2013 a Winding-Up Petition was presented in relation to A&L by a third company, Profixed Interiors Limited, on the basis of a debt of £36,219.17 which did not arise out of or in connection with the work at the property. The petition was supported by eight further companies. Among them was Coveside, which put the debt to them at £471,000. At the date of the present hearing the Winding-Up Proceedings remained unresolved.

At the same time as it started facing the Winding-Up Proceedings, A&L commenced an adjudication against Coveside claiming that the termination of the contract by Coveside was wrongful and that, as a result, considerable sums were owing to A&L. In August 2013 the Adjudicator produced his decision in which he concluded that Coveside’s termination was invalid and therefore A&L were entitled to the amount of £197,690.70 plus interest of £4,230.04. The bulk of this money arose out of an interim certificate issued in March which had not been paid. A&L then issued court proceedings and applied for summary judgment to enforce the decision.

The application was resisted by Coveside, who argued that A&L was insolvent within the meaning of section 123 Insolvency Act 1986 because it was unable to pay its debts as they fell due and that the Court should not give judgment in favour of companies that were already insolvent. Alternatively Coveside sought a stay of execution of any judgment that may be ordered.

ISSUES

The Court had to decide the following issues:-

  • Whether, where (a) a Winding-Up Petition had been presented in relation to a company in whose favour an adjudicator’s award had been issued but (b) no order had yet been made in the Winding-Up Proceedings, the Court should enter judgment to enforce the adjudicator’s decision; and
  • Whether, if judgment were entered in favour of A&L, the Court should stay execution of the judgment pending resolution of all issues between the parties.

DECISION
 
The Court held that: 

  • It would not decide whether A&L was insolvent, because this was a decision to be reached in the Winding-Up Proceedings. 
  • The existence of a Winding-Up Petition, which may or may not be successful, should not be a reason not to enter judgment to enforce the Adjudicator’s decision.
  • A&L was therefore entitled to summary judgment for the amount of the Adjudicator’s award.
  • The financial condition of A&L showed that that if the decision was enforced and payment made to A&L, A&L would be unable to repay at the time any repayment would be due.
  • A&L’s poor financial condition was not due in any significant part to Coveside’s failure to pay the sums found due by the Adjudicator.
  • Therefore, the proceedings should be stayed until after the resolution of all disputes between the parties. 

This summary was provided by CMS Cameron McKenna LLP.

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

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