MAGUIRE & CO v MAR CITY DEVELOPMENTS
Whilst summary judgment for the sum awarded by the adjudicator of 132,145 should be entered in favour of the contractor company which was to be put into members' voluntary winding-up and whilst 75,000 of that sum should be paid, there should be an interim stay of execution on the balance
13 August, 2013
Technology and Construction Court
13th August 2013
The adjudicator awarded the contractor company a specified sum to be paid by the employer. It was decided to wind up the contractor’s business with a view to putting it into a members’ voluntary winding up. The contractor’s accountants were asked to comment on the company's recently prepared balance sheet in order to form a view about its solvency on a winding up basis and its ability to repay the amount of the adjudicator's award if the court were subsequently to order repayment if the dispute was finally resolved in the employer’s favour. Their report concluded that the contractor was solvent on a winding up basis.
Edwards-Stuart J held that (i) Summary judgment should be entered in the contractor’s favour in the sum awarded by the adjudicator of £132,145 (ii) £75,000 of that sum should be paid by the employer within 21 days (iii) Execution of the balance of the judgment sum in excess of £75,000 should be stayed on an interim basis and (iv) Once the contractor had been put into members' voluntary winding-up and the directors had made the required declaration of solvency, it could apply to the court for the stay of the payment of the balance of the judgment sum to be lifted.
The judge stated that the court should adopt a fairly cautious approach when there is a potential insolvency by the receiving party. The starting point should be to accept the conclusions of the contractor’s accountants’ report unless there was anything on its face indicating that they may be incorrect because the report was prepared on a careful and cautious basis and the onus was on the employer to show that the contractor would be unable to repay the adjudicator’s award, Whilst the contractor might have been technically insolvent on an ordinary cash flow going concern basis, it was solvent on a winding-up basis if the contractor’s accountants’ figures were correct. Some allowance should be made for the facts that the contractor had not yet been put into a members' voluntary winding-up and that there might be expenses incurred not catered for by the contractor’s accountants’ report.