Bouygues UK Ltd v Dahl-Jensen UK Ltd [2000] EWCA Civ 507

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Where one party is insolvent and the parties have claims against each other, summary judgment is not appropriate. The operation of rule 4.90 of the Insolvency Rules means that there is a real reason to dispose of the claims at trial.

Court of Appeal (Peter Gibson, Chadwick and Buxton LJJ)

31 July 2000

The facts and decision at first instance are set out on page 14. B appealed from the decision of Dyson J on the ground that the adjudicator had decided a matter outside of his terms of reference. The Court dismissed B's appeal.

The Court recognised that the purpose of section 108 of HGCRA 1996 was to provide parties with a speedy method of resolving disputes, which although not finally determinative, could be sued upon. Where an adjudicator had answered the right question, but in the wrong way, the Court would not interfere with his award. The Court considered the case of Nikko Hotels (UK) Ltd v MEPC plc (1993) 2 EGLR 103.

The Court agreed that in ordinary cases, the claimant should apply for summary judgment. However, where one party had gone into liquidation, and there were claims and cross-claims, rule 4.90 of the Insolvency Rules applied. This provides that where, before a company goes into liquidation, there are mutual credits, debts or dealings between two parties, an account shall be taken of what is due from each party to the other, and sums due from one party will be set off against the sums due from the other, and only the balance needs to be paid to the liquidator (or, if the result is a debt by the insolvent company, the creditor can prove for that sum in the liquidation).

If the losing party had to pay the award, this amount would become part of the fund for distribution among all creditors, and the other party would only receive a pro-rata dividend on his cross-claim. If he could apply rule 4.90, he would be able to set off any sums due to him against the adjudicator's award that he would otherwise have to pay. Therefore, if summary judgment for the whole award was given, the losing party would be deprived of using the award in the insolvency set-off. The effect of rule 4.90 meant that there would be a real prospect of successfully defending the claim and a real reason to dispose of the claims at trial, since the account between the parties would have to be re-opened.

Chadwick LJ believed that the effect of rule 4.90 should have been considered at first instance. However, the point had not been taken before Dyson J, and was not taken in the notice of appeal; counsel for B was not enthusiastic about the point when it was drawn to his attention by the Court. In those circumstances, the Court did not think it right to set aside an order made by Dyson J in the exercise of his discretion. However, the Court did impose a stay of execution upon enforcement of the judgment.

Where one party is insolvent and the parties have claims against each other, summary judgment is not appropriate. The operation of rule 4.90 of the Insolvency Rules means that there is a real reason to dispose of the claims at trial.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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