F G Skerritt Ltd v Caledonian Building Systems Ltd


Technology and Construction Court
Ramsey J
3rd July 2013


Disputes arose between the parties as to the sub-contractor’s payment entitlement based on invoices it submitted to the contractor. The sub-contractor went into administrative receivership. Whilst the administrative receivers ceased to act as such, the sub-contractor was not wound up, although it had ceased trading, but was not struck off the register of companies. The sub-contractor began an adjudication. The adjudicator awarded the sub-contractor a specified sum and did not consider the contractor’s counterclaims.
Ramsey J held that: (i) Summary judgment should be ordered against the contractor to enforce the adjudicator’s award of specified sums to the insolvent sub-contractor (ii) Execution on that judgment should be stayed pending the production by the sub-contractor of a parent company guarantee in terms agreed by the contractor and (iii) The stay should be lifted when the guarantee in the agreed terms was executed and delivered to the contractor.
Whilst there was no challenge to the correctness of the adjudicator's decision in relation to the sums due to the sub-contractor on the two invoices, there were claims by way of defence of equitable set-off for the sums already expended in remedying defects in the sub-contractor’s work and future remedial work to those works. Whilst the contractor had not yet begun proceedings in respect of its claims, they raised real grounds of equitable set-off amounting to a sum exceeding the sums awarded by the adjudicator, provided the contractor with proper grounds for challenging whether the sums held to be due by the adjudicator will in the end be due and meant that the sub-contractor’s insolvency amounted to special circumstances rendering it inexpedient to enforce the judgment. Whilst the sub-contractor was admittedly insolvent, it was not in liquidation with the result that it was appropriate for summary judgment to be entered in the light of the contractor’s admission that the sums awarded were due to the sub-contractor. An appropriate guarantee from the sub-contractor’s parent company in relation to the sums due under the adjudicator's decision would be an appropriate way of providing security for repayment of that sum in the light of the sub-contractor being insolvent and in the event that the contractor was successful in its proposed proceedings against the sub-contractor.