George Parke -v- The Fenton Gretton Partnership
Whilst an adjudicator's decision for the payment of monies could form the basis for a statutory demand, the contractor's statutory demand should be set aside in accordance with paragraph 12.4 of the practice direction under the CPR relating to insolvency proceedings
24 July, 2000
The contractor referred its payment dispute to adjudication. The adjudicator decided that the employer should pay the contractor's final account in full. The contractor served a statutory demand on the employer by way of enforcing the adjudicator's decision. Rule 65 (4) of the Insolvency Rules 1986 confers on the court the power to set aside a statutory demand if the debtor appears to have a counterclaim equalling or exceeding the debt where the debt is disputed on substantial grounds. Paragraph 12.4 of the practice direction made under the Civil Procedure Rules for insolvency proceedings provides that the court will normally set aside a statutory demand if in its opinion there is on the evidence a genuine triable issue where the debtor (a) claims to have a counterclaim, set-off or cross-demand at least equal to the debt and (b) disputes the debt. Judge Boggis held that whilst an adjudicator's decision for the payment of monies could form the basis for a statutory demand, the contractor's statutory demand should be set aside in accordance with paragraph 12.4. This was on the basis that there was on the evidence a genuine triable issue as to whether the employer had a cross-claim at least equal to the amount of the award. The employer had a valid cross-claim in the (separate) court proceedings he had brought against the contractor (in which he claimed that he was owed money by the contractor) which went to the sum demanded and was confirmed as being valid by the defence in those proceedings. Also it would not have been right to make a person bankrupt where it was known that there were in existence proper proceedings which, if successful, would have meant that there would have been a payment to that person. This was because it was not the scheme of the Construction Act 1996 that an adjudication award could be pursued to bankruptcy no matter what the underlying state of account. Advice Note If a defendant in adjudication proceedings has a genuine cross-claim which has not been taken into account, the courts will be inclined to set aside a statutory demand to enforce the decision in the claimant's favour.