ROSSAIR LTD v PRIMUS BUILD LTD
Technology and Construction Court
10 August 2017
The summary judgment in the sub-contractor’s favour should be enforced by way of summary judgment despite the evidence adduced by the contractor that it proposed entering a company voluntary arrangement
The evidence of a representative of the contractor in his witness statement was that (i) The contractor had proposed that it entered a company voluntary arrangement (CVA) and (ii) The relevant documents concerning this proposal had been filed in the Companies Court. However, the proposal for the CVA was not exhibited to the witness statement and the representative did not set out in it any indication of the terms on which the CVA has been proposed.
O’Farrell J held that the summary judgment in the sub-contractor’s favour should be enforced by way of summary judgment on the basis that the evidence indicated that (i) The directors of the contractor company had not taken any steps to bring into effect a moratorium on any legal proceedings against the contractor in respect of the proposed company voluntary arrangement and (ii) There was no moratorium in place in respect of the contractor.
The judge went on to state that the court was therefore left in the rather unsatisfactory position of not having an up-to-date explanation as to the contractor’s current status. Section 1a of the Insolvency Act 1986 provides that ‘Where the directors of an eligible company intend to make a proposal for a voluntary arrangement, they may take steps to enforce a moratorium for the company’. The Insolvency Rules 2016 make provision (i) for a company to provide, in its proposal for a CVA, the nature and demands of the company’s liabilities and (ii) at paragraph 2.15 of chapter four for the notice and advertisement of the beginning of any moratorium to be published and to be delivered to the nominee and to the company, which includes a provision for the notice to be published in the gazette. However, the only evidence that the court had before it was a photocopy of an extract from the gazette in relation to the contractor, which made no reference to any moratorium.
THE FULL TEXT OF THE JUDGMENT OF O’FARRELL J
1. This is the application by the claimant, Rossair Limited, to enforce the adjudication decision of Mr Peter Aberley, dated 21 June 2017, corrected on 26 June 2017, in which he ordered sums against Primus Build Limited. The claim arises out of the construction of a Crowne Plaza hotel at 10 Albert Embankment, London, SE1 7SP. The defendant was engaged as the main contractor by Cannon Corporation Limited and the defendant in turn engaged the claimant, Rossair, as the mechanical installation sub-contractor for the project.
2. The terms of the sub-contract were a sub-contract document dated 15 October 2015. That sub-contract contained, at clause 20, a provision for any dispute to be referred to adjudication and for the adjudication scheme to apply, subject to the provision at clause 20.4.1, that the adjudicator should be nominated by the Royal Institution of Chartered Surveyors.
3. A dispute arose between the parties in respect of two interim payment applications. On 3 May 2017, the claimant referred the dispute to adjudication, and Mr Peter Aberley was appointed as adjudicator by the RICS.
4. Following a number of submissions by the parties, on 21 June 2017, the adjudicator published his decision, subsequently corrected, pursuant to paragraph 22a of the scheme, and re-issued to the parties on 26 June 2017.
5. Under his decision, the adjudicator directed that Primus Build Limited, the defendant, should pay Rossair Limited, the claimant, the sum of £353,726.02 in respect of the interim applications, plus interest in the sum of £7,953.56. In addition, the adjudicator directed the defendant to pay 85% of his invoiced fees, amounting to £6,768.13 plus VAT of £1,353.63.
6. The defendant failed to pay any of those sums, and on 6 July 2017, the claimant commenced these proceedings and issued an application to enforce the adjudication decision by way of summary judgment, under CPR Part 24.
7. The defendant submitted an acknowledgement of service, indicating that it intended to defend the application, but failed to serve any evidence until the witness statement of Mr Neil Graham Sammes, dated 26 July 2017, which was not served on the claimant until yesterday, that is 9 August 2017. The defendant also sent a letter to the court, dated 8 August 2017, in which it indicated that it would not be represented at the hearing of the application, but invited the court to take into account the contents of the witness statement in which it opposes the claimant’s application for summary judgment.
8. The points taken by the defendant are as follows. First of all, it is suggested that the adjudicator did not have jurisdiction to deal with the dispute. I can deal with that matter quite shortly. The notice of adjudication and the referral documents served by the claimant both referred to a sub-contract document which was issued by the defendant to the claimant on or around 15 October 2015. It was common ground that that document had indeed been sent by the defendant to the claimant. It was common ground that that document contained the sub-contract conditions, including clause 20, to which I have already referred, which contained an adjudication provision for any disputes and for provision that the statutory scheme should apply, save for the appointment of an adjudicator to be made by RICS.
9. The dispute that has arisen in relation to the sub-contract conditions is not in relation to the primary terms or the adjudication agreement, but there is a suggestion that some amendments were made by the claimant at a subsequent date, which are contested by the defendant. As the adjudicator quite rightly found, any disputed amendments to the sub-contract did not affect his jurisdiction in this matter, as it was not alleged that any of the amendments affected the adjudication agreement, or the adjudication rules that would be applicable in the event of an adjudication. Therefore, the adjudicator did have jurisdiction and was correct to hold that he did so.
10. Turning to the second point raised in Mr Sammes’ witness statement, at paragraph three of the statement, he states that the defendant has proposed that it enters a Company Voluntary Arrangement (CVA), and the relevant documents concerning this proposal have been filed in a High Court of Justice Chancery Division in Companies Court. In these circumstances, the defendant seeks a stay of the proceedings in this claim.
11. The proposal for the CVA has not been exhibited to Mr Sammes’ witness statement, and he does not set out in his witness statement any indication of the terms on which the CVA has been proposed. In the letter from the defendant, dated 8 August 2017, it is stated that the defendant is in a CVA, as set out in the witness statement of Mr Sammes. However, as pointed out by Mr Gregorio on behalf of the claimant, the witness statement does not, in fact, state that the defendant is in a CVA, but merely that it has proposed to enter into a CVA. Therefore, the court is left in the rather unsatisfactory position of not having an up-to-date explanation as to the current status of the defendant company.
12. My attention has been drawn this morning to the relevant provisions of the Insolvency Act 1986, and the Insolvency Rules 2016. Section 1a of the Insolvency Act 1986 provides that, ‘Where the directors of an eligible company intend to make a proposal for a voluntary arrangement, they may take steps to enforce a moratorium for the company’. Assuming that the defendant was an eligible company, there is no evidence that the company has in fact taken any steps to obtain such a moratorium, and Mr Sammes does not indicate that any such steps would be taken. Therefore, for the purpose of the application this morning, I assume that there have been no such steps taken.
13. The Insolvency Rules 2016 make provision for a company to provide, in its proposal for a CVA, the nature and demands of the company’s liabilities. Also, in the case where there is a moratorium, it is provided at paragraph 2.15 of chapter four, for the notice and advertisement of the beginning of any moratorium to be published and to be delivered to the nominee and to the company. That includes a provision for the notice to be published in the gazette. However, the only evidence that the court has before it is a photocopy of an extract from the gazette in relation to the defendant company, which makes no reference to any moratorium.
14. On the basis of all of that evidence, I am satisfied that the directors of the defendant company have not taken any steps to bring into effect a moratorium in respect of the CVA, and there is no moratorium in place, in respect of the defendant company.
15. In any event, although this court has the power to order a stay, either of the proceedings in general or of any judgment obtained, in respect of an adjudication award, where the defendant is unable to pay the judgment sum, it is only in very exceptional cases that such power will be exercised. There is nothing in the material before the court today to justify the court in staying either the application for Part 24 summary judgment, or in staying the judgment itself.
16. The third point that is relied upon by Mr Sammes in his witness statement is a reference to the main contractor, Cannon Corporate Limited. There is a suggestion that if judgement is given today, the defendant might be in danger of having to pay the interim payment applications twice, having already paid Cannon Corporation Limited.
17. However, although there is evidence that Cannon Corporation Limited terminated the contract with the defendant and provided some support by way of cash flow to the claimant, the claimant’s evidence, which has not been contradicted by anything put before the court today, is that that was by way of loan and that those monies loaned by Cannon have been reimbursed. Therefore, there is no question of the claimant recovering twice in respect of the outstanding payments.
18. For all of those reasons, I am satisfied that this is an appropriate case in which to grant summary judgement to enforce the adjudicator’s decision. I order that judgment be entered for the claimant in the sum of £353,726.02, plus further interest in the sum of £1,282.83 to the date of this order, and continuing at the rate of £25.66 per day. Further, the defendant shall pay to the claimant the sum of £8,121.76, by way of reimbursement of the defendant’s share of the fees of the adjudicator, including VAT. Also, that the defendant shall pay to the claimant its costs of the action and the application.