Westshield Ltd v Whitehouse (TCC - 18.11.2013)
WESTSHIELD LTD v WHITEHOUSE
Technology and Construction Court
18th November 2013
The homeowners engaged the contractor to carry out works under a contract which contained an adjudication clause. The works were finished late. The contractor claimed sums well over the original contract sum attributing the increases to variations and delays, decided later to seek a creditors’ voluntary arrangement due to financial difficulties and began an adjudication against the homeowners. The proposal for a CVA was accepted by the required proportion of creditors. The adjudicator decided that the homeowners should pay the contractor a specified sum. The homeowners’ solicitors wrote to the CVA supervisor stating that they intended to claim as creditor for the cost and expense incurred by them in remedying defective work. The supervisor stated that the claim would be rejected on the basis that there was an adjudicator's decision in the contractor’s favour. The contractor began proceedings to enforce the adjudicator’s decision and applied for summary judgment.
Akenhead J dismissed the contractor’s application for summary judgment to enforce the adjudicator’s decision on the basis that (i) Any further steps in the enforcement proceedings should await the outcome of the account of the supervisors in the contractor’s CVA and (ii) The enforcement proceedings should therefore be stayed until further order.
Whilst the homeowners’ cross-claim primarily emerged as a reaction to the adjudication decision and whilst there were discrepancies, inconsistencies and some lack of substantiation in it, it was not possible to say that there would definitely not be some credit to them if an account was taken of the financial position as between them and the contractor as was required by the CVA conditions. The position was exactly analogous to what Chadwick LJ addressed in Bouygues v Dahl-Jensen, despite his reasoning being related to the direct impact of the Insolvency Act and Rules, because the contractor and the homeowners were, as arguable creditors, bound by the CVA conditions. To borrow from the judgment of Chadwick LJ (i) The effect or "incident" of Condition 23(e) of the CVA conditions was that "claims and cross-claims merge and are extinguished; so that, as between the insolvent and the other party, there is only a single claim - represented by the balance of the account between them" and (ii) "In those circumstances it is difficult to see how a summary judgment can be of any advantage to either party where, as [condition 23(e)] make[s] clear, the account can be reopened at some stage". The fact that the homeowners’ counterclaim was not raised effectively in the adjudication proceedings did not alter this conclusion because (i) It could be said to be a facet or consequence of the "mutual dealings" envisaged by condition 23(e) and (ii) There was no res judicata or issue estoppel arising out of the adjudication.