Canary Riverside Development (Private) Ltd v Timtec International Ltd

The employer should not have leave under section 11(3)(d) of the Insolvency Act 1986 to commence an adjudication against the trade contractor in administration where the trade contractor had already started court proceedings against the employer
The trade contractor went into administration. The employer sent a cheque in respect of payment applications to the trade contractor after it went into administration. After the cheque was presented, the employer was informed of the administration and stopped the cheque. The employer determined the trade contractor's employment under the trade contract. It also issued notices of withholding under section 111 of the Housing Grants, Construction and Regeneration Act 1996 in respect of any sums otherwise due under the contract on the basis that it was not liable under the trade contract to make any further payment to the trade contractor until the development's practical completion. The employer applied for leave pursuant to section 11(3)(d) of the Insolvency Act 1986 to start adjudication proceedings. However, the trade contractor had already started court proceedings for payment of the amount of the cheque. The registrar at first instance refused to grant leave to the employer. The employer appealed. David Oliver QC on appeal held that the employer should not be granted leave to start adjudication proceedings against the trade contractor. The deputy judge stated that it was clear law that adjudication proceedings were ?proceedings? within the meaning of section 11(3)(d). Also an appeal against a refusal to grant leave under section 11 application should only be granted where the court was satisfied that the judge at first instance had exercised his discretion on wrong principles. Despite it being accepted on appeal that the employer had not served it withholding notices out of time, a large part of the justification for such an adjudication process disappeared where, as in the instant case, court proceedings were already underway. The claims being made by the employer against the trade contractor were perfectly capable of being resolved in the court proceedings begun by the trade contractor with the result that it was difficult to say that the decision of the registrar at first instance was flawed. Advice Note The court will be unlikely to grant leave for a proposed claimant to begin adjudication proceedings against a company during the period that an administration order is in force against it where the company has already begun court proceedings against the proposed claimant which will resolve the outstanding issues between the parties.