Enterprise Managed Services Ltd v Tony McFadden Utilities Ltd
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE COULSON |
| Judgment Date | 02 December 2009 |
| Neutral Citation | [2009] EWHC 3222 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-09424 |
| Date | 02 December 2009 |
[2009] EWHC 3222 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
St. Dunstan's House
133137 Fleet Street
London EC4A 1HD
Before: THE HONOURABLE MR. JUSTICE COULSON
Case No: HT-09424
MR. SIMON LOFTHOUSE QC and MISS CAMILLE SLOW (instructed by Messrs. HBJ Gateley Wareing LLP) for the Claimant
MISS STEPHANIE BARWISE QC and MR. MARK CHENNELLS (instructed by Messrs. Mishcon de Reya) for the Defendant
Hearing Dates: 26th and 27th November 2009
MR. JUSTICE COULSON:
INTRODUCTION
By proceedings issued under CPR Part 8 on 27 th October 2009, the claimant, Enterprise Managed Services Limited (“Enterprise”), seek a series of 12 declarations against the defendant, Tony McFadden Utilities Limited (“Utilities”), in connection with ongoing adjudication proceedings which were commenced by Utilities as the referring party in September of this year. Enterprise contend that, for a variety of reasons, the adjudicator had no jurisdiction and that therefore the adjudication, which is due to be completed on 23 rd December 2009, should be aborted forthwith.
Although there are a variety of issues between the parties (more fully summarised in Section 3 of this judgment) there is one dispute of potentially wide application. It is this: to what extent, if at all, does an adjudicator appointed under the Housing Grants (Construction and Regeneration) Act 1996 (“the Act”) have the jurisdiction to take an account and identify a net balance due arising out of mutual dealings between the parties pursuant to Rule 4.90 of the Insolvency Rules 1986? I am very grateful to all counsel and solicitors for their assistance in dealing with this and the other issues, a process that has been coloured by the urgency of resolving the jurisdiction issues well in advance of the extended date on which the adjudicator is to provide his decision.
THE MATERIAL FACTS
By Main Contract dated 5 th May 1998 Thames Water Utilities Limited (“TWUL”) engaged Thames Water Services Limited, trading as Subterra (“Subterra”), to carry out the repair and maintenance of mains, service pipes, and other fittings. By a Sub-Contract dated 13 th November 2002 Subterra engaged Tony McFadden Limited (“TML”) to carry out this work in the North London area. This was known as the NLSDA Sub-Contract. This was a construction contract within the meaning of the Act.
On 31 st August 2003 Enterprise agreed to buy the business of and the assets owned by Subterra. The Asset Purchase Agreement contained the following terms:
“Recitals
A. The Vendor carries on the Business and has agreed to sell and the Purchaser has agreed to purchase the Business and the Assets as a going concern on the terms and conditions set out in this Agreement.
B. The Guarantor is the parent company of the Purchaser and has agreed to enter into this Agreement for the purposes of acting as the Guarantor of the Purchaser's obligations to the Vendor hereunder.
Definitions and Interpretations
'Assets' —the property rights, contracts, goodwill and undertaking and other assets owned or used in or in connection with the Business as at the completion date to be sold and purchased in accordance with clause 2.1 other than the Excluded Assets.
'Assumed Liabilities' —all liabilities of the Vendor arising from the operation of the Business (including the Creditors) or any of the Assets and incurred before the Completion Date whether actual or contingent but for the avoidance of doubt excluding the Excluded Liabilities, and references to an Assumed Liability to be construed accordingly.
'Business' —together the business of providing network and civil engineering services to the public and private utility sectors including the Trans4M Contracts (the Utilities Services Business) and the provision of know-how and development facilities and related goods and services for related products (the Pipe Systems Business) under the name Subterra as currently carried on by the Vendor at the date hereof.
'Contracts' —All contracts and other arrangements, whether set out in writing or not, entered into by or on behalf of the Vendor and/or any other member of the Vendor's group solely in connection with the business including without limitation: (i) those listed in Schedule 9 Contracts including the IP Licences received…
2. Sale and Purchase of the Business and Assets
2.1 The Vendor agrees to sell (or procure such sale or transfer) with full title guarantee and the Purchaser agrees to purchase the Business as a going concern and all the Assets free of all encumbrances as at the close of business on the Completion Date. The Assets to be sold and purchased pursuant to this Agreement are …
2.1.2 The benefit subject to the burden of the Contracts.
2.1.3 The benefit subject to the burden of the Customer Contracts.
…
4. Consideration
4.1 The aggregate consideration for the purchase of the Business, Goodwill and the Assets payable by the Purchaser to the Vendor is
4.1.1 £577,000 plus or, as the case may be, minus the amount by which the adjusted net asset value exceeds or as appropriate is less than £9,423,000 and
4.1.2 An obligation on the part of the Purchaser to assume, pay, satisfy, discharge and fulfil the Assumed Liabilities.
…
6. Liabilities
6.1 The Purchaser herby undertakes that it shall be responsible for and shall promptly perform, assume and pay, discharge or satisfy all the Assumed Liabilities.
7. Contracts
7.1 The Purchaser shall be responsible for assigning, novating or otherwise transferring all Contracts other than (i) the Trans4M Contracts which are to be dealt with by the Trans4M Sub-Sub-Contracts; (ii) The Thames Water Contracts which are to be assigned to the Purchaser upon Completion and (iii) all other contracts to which any member of the Vendor's Group is a party where the Vendor shall be responsible in accordance with clause 7.7.
7.2 Subject to clause 7.9 the Purchaser shall accept an assignment, novation or other transfer of and shall be entitled to the benefit of and shall observe and perform or procure to be observed and perform with effect from the Completion Date all the obligations of the Vendor under the Contracts to be observed or performed in accordance with their respective terms following Completion provided always that the terms of the assignment, novation or other transfer do not operate to transfer or require the Purchaser to assume any Excluded Liabilities.”
Schedule 20 identified the Thames Water Contracts and included the Primary Term Agreement related to the NLSDA.
Also on 31 st August 2003 there was a Deed of Novation pursuant to which it was noted in the recitals that Enterprise “wishes to assume all rights and obligation previously enjoyed or incurred by [Subterra] in respect of the Agreements and the Contracts” listed in the Schedule. The Schedule included the NLSDA Main Contract.
It appears that, from September 2003 onwards, Enterprise made payments to TML pursuant to the NLSDA Sub-Contract including a large payment, some £250,000, just a few days after the purchase and novation documents noted above were completed. On 26 th March 2004, TML sent Enterprise their Final Account in respect of the NLSDA works, which Account was the subject of comment and criticism in a letter from Enterprise dated 1 st April 2004. On 21 st April 2004, Enterprise wrote again to TML, saying that their engagement under the Main Contract was being terminated and that
“… as a result of this termination and in accordance with clause 20 of your Sub-Contract Agreement we must advise you of the termination of your Sub-Contract Agreement with Enterprise Management Services Limited, formerly Subterra.”
Subsequently in 2005 and 2006 Enterprise engaged TML on another Sub-Contract referred to in the papers as “The Lot 8 Sub-Contract”. At the same time two other smaller Sub-Contracts were agreed between Enterprise and TML. One was called the Three Valleys Sub-Contract and the other was a rather more informal van hire Sub-Contract.
In May 2006 TML went into administration and, in consequence, the Lot 8 Sub-Contract was terminated. In September 2007, TML's administrators submitted a Final Account to Enterprise in relation to the NLSDA Sub-Contract seeking an alleged balance due of about £2.5 million. No sums were paid. On 19 th November 2007 joint liquidators of TML were appointed.
On 11 th August 2008, TML's liquidators served what was called a 'Pre Action Adjudication Statement' on Enterprise, which set out their detailed claim in respect of the NLSDA Sub-Contract. This document included a lengthy Scott Schedule, which was itself based on a document originally served by Enterprise. On 29 th August 2008, the liquidators gave Enterprise until 12 th September 2008 to respond to these documents. No response was forthcoming.
On 1 st September 2008, TML's liquidators served similar claim documents in relation to the Lot 8 Sub-Contract. TML's claim was for some £2.6 million. On 10 th October 2008, Enterprise responded, serving their own claim against TML in relation to the Lot 8 Sub-Contract, based on alleged overpayments. On the basis of Enterprise's detailed analysis, a sum in excess of £3 million was then said to have been overpaid to TML in respect of the Lot 8 works.
Thereafter, between October and December 2008, the TML liquidators and Enterprise exchanged various letters concerning the disputes between them. On 29 th December 2008 Enterprise confirmed their intention to prove in the liquidation.
However, nothing then happened between the parties for some nine months. In June 2009 (although Enterprise were not aware of it) the liquidators assigned to Utilities what was called “the Net EMSL Balance”, “EMSL” being the shorthand description of...
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