We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
This article looks at whether the courts will enforce an
adjudicator's decision when faced with a Notice of Intention to
Appoint an Administrator from the company found liable under such a
decision.
In the early part of 2017, in the case of South Coast
Construction Limited v Iverson Road Limited1, the court
exercised its discretion to allow an adjudicator's decision to
be enforced despite the issue of an NIA. Such a notice normally
puts a hold on any court proceedings, but it is subject to the
Court's discretion.
Bernards Sport Services Limited v Astrosoccer4u
Limited2.
That issue came up again later in 2017: Astrosoccer4u
("Astro") entered into a contract with Bernards Sport
Services ("Bernards") for Bernards to provide them with a
sports pitch.
The pitch was provided but a dispute arose over payment. Bernard
said it had issued a valid Payment Notice and, as there was no Pay
Less Notice in response to it, Astro had to pay the full amount of
the sum claimed. But Astro did not pay. So Bernards referred the
dispute to adjudication. Astro alleged that there were defects in
the pitch, although this was not something that had been raised in
a Pay Less Notice. It was therefore not something considered in the
adjudication.
Bernards were successful, being awarded circa £175,000
against Astro. But still no payment was made.
In a telephone conversation between the parties, Astro admitted
that the sum found due by the adjudicator was, indeed, due. But
rather than making payment, or any proposals for the same, ten days
later Astro's solicitors, who had been involved in the
adjudication, wrote to Bernards stating in effect that either they
mediate the dispute or, if not, then Astro would enter into
insolvency and Bernards would then face a claim from the insolvency
practitioner for the alleged defects to the pitch.
Astro then took various measures to restructure the company
which, from the Court's judgment, was in the "...hope of
avoiding paying this legitimate debt".
Draft notice of intention to appoint an administrator
Astro sent a draft notice of intention to appoint an
administrator to Bernards, but the court found that they had no
intention of serving that notice, and that instead, "...the
letter made plain that it was being provided in draft so that
further pressure was being put on the claimant to withdraw the
Court proceedings and agreed to meet to discuss the
settlement".
Astro lodged a fresh notice of intention to appoint an
administrator in the Companies Court on 31 August 2017. But the
judge found that there was no evidence that that document had been
filed at Companies House, as required. The judge found that that
was, "...plainly part of the defendant's endeavours to
avoid this hearing or judgment being given at this
hearing".
The judge found that the actions of the defendant Astro were
"...part of an attempt to avoid this debt. I regard them, as a
completely bogus series of events, endeavouring to prevent the debt
being paid".
Use of Victorian company legislation to avoid paying a due
debt
The notice of intention to appoint an administrator was
contradicted by the fact, as the judge found, that Astro was still
trading through its website. The judge concluded that
"Accordingly, on the face of all that, this is a classic
example of two directors endeavouring to use Victorian company
legislation to avoid paying a due debt. That, of itself, is
(regrettably) not unusual. What is unusual here, in my judgment, is
the connivance of [Astro's solicitors]".
The judge was highly critical of the conduct of Astro, but also,
unusually, also critical of the actions and conduct of its
solicitors.
Largely in light of the above conduct, judgment was given for
Bernard against Astro.
The clear message from the court in this case is that parties
need to ensure that they use insolvency processes only for genuine
insolvency purposes. If they seek to do otherwise, then the court
can take that conduct into account against them in subsequent court
proceedings. Based on the court's judgment in this case, it is
likely that if Astro did subsequently go into insolvency, then any
liquidator would be required to look carefully at the various
transactions entered into by Astro in the run up to the court
hearing, as to whether there were attempts to dissipate assets
unlawfully.
Footnotes
1 [2017] EWHC 61 (TCC)
2 [2017] EWHC 2425 (TCC)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Heads of terms ("HOTs") are commonly produced at the outset of property transactions. They often set out the parties' agreement in principle on key commercial ...
The High Court delivered a sobering reminder in June of this year in respect of the need for parties to be clear as to their intentions with regard to heads of terms.
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Connecting Contractors With Innovative Construction Materials And Techniques - E360 (Video)
