Guardi Shoes Ltd v Datum Contracts
28 October 2002
A payment dispute arose. Although the employer maintained the position that work carried out by the contractor was defective, it failed to serve any notice of intention to withhold payment. The contractor referred the dispute to adjudication and was awarded a specified sum in the absence of any such notice. Judgement was entered by the court for the sum awarded by consent. The employer failed to pay the sum awarded after the contractor served a statutory demand with the result that it then presented a winding-up petition. The issue for determination was whether the employer was entitled to an order restraining of the petition’s advertisement.
Ferris J held that the employer should not be granted an order restraining the advertisement of the winding-up petition presented by the contractor notwithstanding the employer’s alleged cross-claim for defective work arising out of the same contract on the basis that the employer failed to serve a contractual notice of intention to withhold payment at the time the cross-claim arose.
The advertisement of a petition would not be restrained unless the court was satisfied that (1) the presentation of the petition represented an abuse on the part of the petitioner by reason of the debt asserted being disputed to the petitioner’s knowledge on substantial grounds and in good faith and (2) the petition, if heard, was bound to be dismissed. Notwithstanding that the employer had a cross-claim which was not obviously without substance and which might have been made good in respect of a substantial sum, the cross-claim came forward very late and after other excuses not connected with the supposed defects had been offered for the failure to satisfy the consent judgment for the sum awarded. In the circumstances the employer had only itself to blame and the court could not be satisfied that the above conditions had been satisfied.
If a defendant fails to serve a notice of withholding when it had the opportunity to do so, it can expect little sympathy from the court if it subsequently opposes the advertisement of a winding-up petition as part of the process of enforcing the sum awarded by an adjudicator’s decision as a result of that failure.