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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Rainford House Ltd v. Cadogan Ltd  EWHC Technology 18 (09 February 2001)
Cite as:  BLR 416,  EWHC 18 (TCC),  NPC 39,  EWHC Technology 18
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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
BEFORE: HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.
RAINFORD HOUSE LIMITED
Case number: HT 01/014
Dates of Trial: 9 February 2001
Date of Judgment: 13 February 2001
Simon Hargreaves for the claimant (Walker Morris, Solicitors )
Richard Rundell for the defendant (Coleman & Betts, Solicitors )
I direct that no further note or transcript be made of this judgment.
The text of the Judgment of His Honour Judge Richard Seymour Q.C. is as follows:
Within seven days of this Decision being taken up by either Party, Cadogan
shall peremptorily pay to Rainford £75,133.78 (seventy five thousand, one
hundred and thirty three pounds and 78 pence).
"(2) My fees and expenses amount in total to £4,400.02 including VAT which sum shall be paid by Cadogan. In the event that Rainford have paid all or part of this sum then Cadogan shall reimburse Rainford the sum so paid concurrent with the Payment directed at (1) above."
The sum claimed in this action is the aggregate of the sum of £75,133.78, the sum referred in paragraph (1) of the passage quoted, an amount of £2,200.01, being one half of the amount of Mr. Pontin's fees, which Rainford had paid, and a small amount of interest. There is no dispute about how the sum claimed has been calculated, or that the effect of the decision of Mr. Pontin, if that decision is immediately enforceable, is that the sum claimed, plus some further sum by way of interest which has accrued since this action was commenced on 18 January 2001, is the sum which should now be paid by Cadogan to Rainford. The application before the Court is that of Rainford for summary judgment for the sum claimed in the Particulars of Claim, plus interest since 18 January 2001. Subject to one point it is accepted by Mr. Richard Rundell, who appeared as Counsel on behalf of Cadogan, that Rainford is entitled to the judgment which it seeks.
view of the complaints and the late running of the works, the directors of
Cadogan Limited required confirmation from Rainford House Limited's bankers,
(Nat West, Wakefield), that Rainford House Limited had sufficient funds and
facilities to complete all contracts in progress including the Atlantis project.
Written confirmation was received. It was therefore, a considerable surprise
to the directors when a director of the Alpha plant hire company telephoned
on the 22nd December 2000 to inform the directors that Rainford
House Limited had been taken into administrative receivership, that Alpha
plant hire were owed £16,000, and requesting Cadogan Limited to pay the outstanding
monies due to Alpha by Rainford House Limited. At this time, the Atlantis
contract had been determined because of lack of due diligence by Rainford
The evidence of Mr.Clayton, at paragraph 10 of his witness statement, also dated 31 January 2001, was, so far as is presently material:-
site agent informed me that the following subcontractors: Lillekers Bros.
Ltd., David Hallam Ltd. (Pools), Hughes Building Services (Plasterers and
Renderers), and David Brown (Roofing Services), had pulled off site, as they
had not received payment from Rainford House Ltd even though all of this money
had been paid by Cadogan to Rainford House Ltd on 10th November
2000 as part of the payment for application 13."
None of that evidence was contradicted or explained on behalf of Rainford.
court may give summary judgment against a claimant or defendant on the whole
of a claim or on a particular issue if –
- that claimant has no real prospect of succeeding on the claim or issue; or
that defendant has no real prospect of successfully defending the claim
or issue; and
He also drew to my attention the decision of the Court of Appeal in the case of Bouygues (UK) Ltd. v. Dahl-Jensen (UK) Ltd.  BLR 522, the judgments in which were handed down on 31 July 2000. In that case the defendant, which was a company in liquidation, sought to enforce by an application for summary judgment the award of an adjudicator under the provisions of Part II of the 1996 Act. At first instance the defendant was successful. On the hearing of the appeal an issue which arose was whether it was appropriate to give summary judgment in relation to the award of an adjudicator made under the provisions of Part II of the 1996 Act in a case in which the claimant was in liquidation. That issue was considered in detail in the judgment of Chadwick LJ, with which on this point the other members of the Court of Appeal, Peter Gibson LJ and Buxton LJ agreed. At paragraph 35 of his judgment, on pages 528 and 529 of the report, Chadwick LJ said:-
24, rule 2 of the Civil Procedure Rules enables the court to give summary
judgment on the whole of a claim, or on a particular issue, if it considers
that the defendant has no real prospect of successfully defending the claim
and there is no other reason why the case or issue should be disposed of
at a trial. In circumstances such as the present, where there are latent
claims and cross-claims between parties, one of which is in liquidation,
it seems to me that there is a compelling reason to refuse summary judgment
on a claim arising out of an adjudication which is, necessarily, provisional.
All claims and cross-claims should be resolved in the liquidation, in which
full account can be taken and a balance struck. That is what rule 4.90 of
the Insolvency Rules 1986 requires."
Mr. Rundell has drawn to my attention that a Defence and Counterclaim has been served on behalf of Cadogan in which it has been pleaded that Rainsford was in breach of the contract on which its present claim before Mr. Pontin was based by failing, it is said, to proceed diligently with the building work at the property called "Atlantis" which was the subject matter of that contract. It is also pleaded that Rainsford has actually been overpaid for work which it has carried out, notwithstanding the decision of Mr. Pontin, and that Cadogan has had to pay various sub-contractors which should have been paid by Rainsford, in order to induce those sub-contractors to continue to work on the site. The total sums allegedly overpaid or paid to sub-contractors amount to £73,950.66. There is evidence in support of those counterclaims in the witness statements of Mr. Beesley and Mr. Clayton to which I have referred. Mr. Rundell submitted that, for the purposes of deciding whether it was appropriate to give summary judgment for the amount of an adjudicator's award, there was no difference between the case in which the claimant is in liquidation and the case in which the claimant, as here, is in administrative receivership. The critical factor, he said, was whether there was a risk of injustice to the paying party under the adjudicator's award because he was exposed to the real possibility that he would be called upon to pay the claimant, whilst being denied the opportunity in due course to redress the balance by pursuing his own claims. .
a judgment is given or an order made for the payment by any person of money,
and the court is satisfied, on an application made at the time of the judgment
or order, or at any time thereafter, by the judgment debtor or other party
liable to execution –
then, notwithstanding anything in Rule 2 or 3, the court may by order stay the execution of the judgment or order by writ of fieri facias either absolutely or for such period and subject to such conditions as the court thinks fit."
Mr. Hargreaves accepted that I had jurisdiction to grant a stay. In his oral argument, although not in his written skeleton argument in reply to the skeleton argument of Mr. Rundell, Mr. Hargreaves accepted that, if I found that there was evidence that Rainford was insolvent, that finding could amount to "special circumstances" such as to justify the grant of a stay of execution of a judgment in this case. However, he submitted that, on the evidence I should not make any such finding. He sought to support the latter submission by reference to an unreported decision of H.H. Judge Humphrey Lloyd Q.C. made on 28 July 2000 in the case of Herschell Engineering Ltd. v. Breen Property Ltd. A transcript of that decision was put before me. In it H.H. Judge Humphrey Lloyd Q.C. had to consider, as I may have to in the present case, the question of whether to grant a stay of execution once summary judgment has been given for the amount of an award made by an adjudicator under Part II of the 1996 Act. About the judgment debt created if summary judgment is entered in such a case Judge Lloyd Q.C. said at pages 4 to 6 of the transcript:-
debt which crystallises as a judgment debt is, however, one of a somewhat
unusual nature, since it stems from the decision of an adjudicator which is
provisional and not final and is capable of being reversed in that the ultimate
tribunal (court or arbitrator) which has jurisdiction to resolve the dispute
finally may take a different view. It may decide that, for example, the sum
ordered to be paid was not due either in fact or in law in whole or in part,
perhaps because of additional evidence or submissions, just as an adjudicator
has to take account of all available evidence and submissions and is not confined
to the reasons which gave rise to the dispute. The adjudicator's decision
is not therefore a decision for all time that the defendant owes the claimant
a particular sum of money. It is merely a decision that, at the present time
and on the basis of the material then available to the adjudicator, a sum
of money appears to be due. An adjudicator's decision is taken in a limited
time and frequently on a limited basis and may not therefore be the correct
resolution of the dispute. Unless the decision was made without jurisdiction
or there is some other reason why the decision should not be enforced it is
now well established that adjudicators' decisions will be enforced on an application
for summary judgment.
"That judgment is not of course a decision that the dispute was correctly resolved, but only there are no grounds in fact or law under the provisions of Part II of the Housing Grants Construction and Regeneration Act 1996, as construed by the courts, for concluding that the defendant has realistic prospects of success in challenging the validity of the decision itself. Like the decision itself it is not a judgment which precludes a defendant from asserting later that the decision was the wrong answer to the dispute or from succeeding in that contention, even though the defendant did not take part in the adjudication or opposed the application for summary judgment. In my view that feature means that an application for a stay may require to be heard with some care."
With all of those observations I respectfully agree. However, the passages upon which Mr. Hargreaves sought to place particular reliance were, first, one at pages 10 to 11 of the transcript, in which Judge Lloyd Q.C. said:-
are the facts in this case? It is said that the claimant company accounts
show that it is a small entity with a very small paid-up share capital of
£2. Very little more in known apart from the fact that there is standard floating
charge on its assets in favour of its bankers. The company was formed or began
to trade in about March 1999. It entered into the contract which is the subject
of this action and the adjudication in June 1999. The time had not then yet
arrived when it was obliged to file any of its annual accounts.
"I am invited to draw the inference that the company would not be able to repay the money if the ultimate tribunal found in favour of the defendant. That in turn raises the question: at what stage would that decision be made? It is not a question of whether it would not be able to repay the money now, it is a question of whether it would not be able to repay the money at the time when the moment of repayment might arise. The test is, therefore, comparable to that under section 726(1) of the Companies Act 1985 (see now also CPR Rules 25.12 and 25.13 (2)(c)). on an application for security for costs. It is therefore incumbent on an applicant to establish when that date is."
The second passage upon which Mr. Hargreaves particularly relied was at page 12 of the transcript, and was in the following terms:-
Mr. Davies [Counsel] says that it is incumbent upon the claimant to
establish that it will have the money either now or at a future stage. I reject
that submission. It is for the applicant to make out its case. It could, for
example, have obtained credit references which can frequently show whether
a company is in the eyes of its own bankers good for the repayment of the
disputed debt. Such evidence is sometimes material. Again, it is not for the
respondent to the application to produce management or other accounts. In
any event that type of financial information can all too often be unreliable
as it is either self-serving or of doubtful utility. It is for the defendant
to establish the proposition that if there was a judgment which did not uphold
the adjudicator's decision, then the amount due under that judgment would
not then be honoured by the claimant. In my view the applicant in this case
has failed to do so."
A provision making payment under a construction contract conditional on
the payer receiving payment from a third person is ineffective, unless that
person, or any other person payment by whom is under the contract (directly
or indirectly) a condition of payment by that third person, is insolvent.
"(2) For the purposes of this section a company becomes insolvent-
If the policy of the statute is that a "pay when paid" provision may properly be relied upon if the ultimate paying party is insolvent, so that the intermediate paying party may end up out of pocket if called upon to pay the claimant, it is plain, in my judgment, that the statute is not concerned to re-allocate the risk of having to endure the consequences of a trading partner becoming insolvent, but simply to address the question, on the footing that all parties are solvent, which party should hold the fund of money about which there is a dispute pending the resolution of that dispute. Thus, if there is a substantial chance, demonstrated by objective evidence, such as the making of a winding-up order, or the appointment of a receiver, that money the obligation to pay which is actually disputed, notwithstanding that the notice contemplated by section 110 of the 1996 Act has not been given, will, if paid, for practical purposes be lost, it seems to me that that is a circumstance which, as Chadwick LJ indicated in his judgment in Bouygues (UK) Ltd. v. Dahl-Jensen (UK) Ltd., ought to be considered on any application for summary judgment. That is not to say that vague fears or unsubstantiated rumours of insolvency will merit much attention, but evidence that some third party has taken action which puts the continued financial viability of the claimant at hazard must, I think, be evaluated seriously.
(ii) in the absence of evidence to suggest that the position as it appears at the time the application is before the court is likely to alter the inference which should be drawn is that it will not.
12. In the present case it seems to me that the evidence put before me on behalf of Cadogan raises a strong prima facie case that Rainford is currently insolvent. That evidence has not been contradicted or explained. I think that I should draw the inference that the present financial position of Rainford as revealed by the evidence put before me will not change, so that I should conclude that Rainford will be unable to repay the amount for which I think it appropriate to give judgment in the event that it is hereafter found that the decision of Mr. Pontin was incorrect.
13. The appropriate course in the present case seems to me to be to give summary judgment for the sum claimed, £77, 350.75, together with appropriate interest thereon between 18 January 2001 and today, as to which I will hear Counsel, but with a stay of execution pending the trial of the Counterclaim, or further order, such stay to be conditional upon Cadogan paying the judgment sum into court not later than 4pm on Wednesday, 28 February 2001. I shall give Rainford permission to apply in relation to the lifting of the stay to cover the possibility that Rainford may be able and willing to provide security for the repayment of an amount up to £77,350.75 in the event that the Counterclaim succeeds.