Alexander & Law Ltd v Coveside (21BPR) Ltd (TCC - 12.12.2013)

The existence of the winding up petition brought against the contractor did not constitute a reason not to enter summary judgment to enforce the adjudicator's decision



Technology and Construction Court
Coulson J
12th December 2013

The contractor company was in financial difficulties and ceased trading with the result that the employer terminated the contract. The contractor did not apply for an administration order. A winding up petition was presented against the contractor by a sub-contractor which did not arise out of or in connection with the work at the property in question. The petition was supported by eight further companies, which included the employer as well as sub-contractors and suppliers. The contractor brought an adjudication in which it claimed that the employer’s termination of the contract was wrongful. Whilst the adjudicator held that the termination of the contract was wrongful, he made it clear in his decision that he was far from comfortable with that conclusion. In consequence of his conclusion as to the termination, the adjudicator concluded that sums relating to unpaid retention monies and an unpaid certificate. The winding up proceedings remained unresolved by the time of the enforcement hearing due to the hearing in respect of the petition being adjourned.
The employer submitted that the contractor was insolvent within the meaning of section 123 of the Insolvency Act 1986 (and that judgment should therefore not be entered) because there was an unsatisfied judgment in favour of a sub-contractor and the evidence demonstrated that it was unable to pay its debts as they fell due.
Coulson J refused to order summary judgment against the employer to enforce the adjudicator’s decision. The judge rejected the employer’s suggestion that the “near miss” theory should be taken into account in deciding whether to enter judgment on the ground that the adjudicator indicated in his decision that he was far from comfortable with his conclusion that the employer had wrongly terminated the contract. The fundamental difficulty with the employer’s submission that the insolvency would relate back to the presentation of the petition was that it required the court to reach a decision in advance of the hearing of the winding up petition as to whether it would be successful. Whilst the contractor’s financial position should be taken into account when considering whether to grant a stay of execution of the judgment, the court should not reach any conclusion on the likely success of the petition (and therefore whether the contractor was indeed insolvent) in advance of the adjourned hearing of the petition.