Re Pan Interiors Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE WARREN |
| Judgment Date | 14 July 2005 |
| Neutral Citation | [2005] EWHC 3241 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: GLC/99/05 |
| Date | 14 July 2005 |
[2005] EWHC 3241 (Ch)
Mr Justice Warren
Case No: GLC/99/05
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR M OUWEHAND appeared on behalf of the Appellant.
MR S ROBINS appeared on behalf of the Respondent.
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In this case the applicant, Pan Interiors Limited ("Pan"), seeks an injunction restraining the presentation by the respondent A & C Interiors Limited ("A & C") of a winding-up petition against it. As will become apparent, the central issue is whether Pan is able to show that it has a good right of set off or a good cross claim against A & C exceeding the amount of the claim on which A & C based a statutory demand against Pan. Mr Ouwehand appears for Pan and Mr Robins for A & C.
There is a significant dispute of fact which of course I cannot resolve on this application. The main evidence comes from Mr Colin Appleby on behalf of Mr Pan and Mr Adam Bailey on behalf of A & C. I start with what is not contentious.
A & C's business is the supply of labour to main contractors and subcontractors providing partition and ceiling fixes. A & C does not have anything to do with tape and jointing, a process carried on after the fixing carried out by A & C's operatives. Pan's business includes the refurbishment of large premises. Pan was contracted sometime in 2003 under an order by Mansell plc to work at Heathrow Airport on a construction project for BAA plc ("the project"). This contract was for the internal fit-out of partitions and ceilings, including work on what has been referred to as Piers 5 and 6. As Mr Appleby puts it:
"As is normal for projects of this size it was necessary for us to hire subcontractors to provide extra labour for the Project. Following satisfaction of the relevant security clearance processes which began in November 2003, around January 2004 I asked A & C to provide partition and ceiling fixers for the Project from May 2004 until February 2005.
There was no written agreement or order passing between the parties. I simply agreed a 'daywork' rate of £140 for each fixer with A & C and the fixers attended the site alongside the labour provided by other subcontractors. The practice had been for Pan supervisors to complete daily allocation timesheets setting out the date, description of work and the hours worked by each A & C operative on site. A Mansell representative would usually sign the foot of the timesheet to show that he was happy that the hours worked were accurately recorded. A & C would then raise invoices addressed to Pan based on the timesheets. To date, Pan has paid A & C approximately £330,000."
He goes on to say this about defective workmanship:
"As the Project neared completion, on or about 21 st February 2005 I was informed by Mansell that it would be withholding approximately 5% of the sums owed to all its contractors, including Pan, since there were a large number of defects in the Project that BAA required to be put right. An amount of approximately £200,000 is being withheld from Pan. From the end of January onwards BAA's Project Managers began issuing snag lists which to date stand at approximately 3,200 items together with hundreds of photographs showing the defects.
Since Pan had hired a number of labour-only subcontractors, it was imperative for us to identify which subcontractors were responsible for which defects so that the responsibility for repairs would fall to that particular company. From the allocation sheets A & C could be identified as being responsible for carrying out work on a number of defective items so Pan withheld any further payments to A & C until the defects could be addressed."
That is at least what Mr Appleby says.
He then produces a long schedule running to 182 pages which he says was prepared by Pan's solicitors setting out the defects identified so far. The first three pages is a list which cross-refers to photographs and allocation timesheets. These are daily sheets, certain rows and columns showing the name of the operative, the operations carried out and their locations, and the hours spent by each operative. There is not sufficient detail for the reader to determine either the precise location or the precise extent of the work carried out. The descriptions are more general. The photographs were not, I think, taken for Pan but for BAA's project managers in order to prepare the snagging list referred to by Mr Appleby. Some bear quite recent dates.
Mr Appleby also produced some estimates. He said:
"…I have estimated the costs of rectifying the defects. For clarification the Labour costs are based on a calculation of £170 (as opposed to the £140 'daywork' rate) to reflect the fact the work will need to be carried out at night.
It is difficult at this stage to give a precise estimate of how much it will cost to rectify the defects in A & C's work because we are still identifying defects for which A & C may be responsible. The costs involved with carrying out these works would be affected by the fact that the works could only be carried out in a restricted timeframe between the last flight of the day (approximately 11.30 p.m.) and before the first flight the next morning (approximately 4.30 a.m). As such there would only be a small window of opportunity each morning to carry out the necessary works, compounded by the fact that the equipment would have to be delivered, set up, cleared and removed each session due to safety restrictions on leaving equipment on site. The cost of these works would also be increased by the fact that Mansell are duty bound to provide supervision in respect of any works and because further follow-on works will need to be carried out by Pan in respect of tape and jointing work and Mansell in respect of redecoration work. The costs of these follow-on works would fall to A & C."
Mr Robins has a number of submissions on these estimates, which I will come to in due course.
Part of the exhibit to Mr Appleby's first witness statement is a page headed "A & C Interiors Limited staff list", and there follows a list of some 20 names. There are names in the rows on the daily allocation sheets which do not appear on the list. Indeed, some of the work listed (see for instance the allocation sheet for 5 th September 2004 at page 54 of the bundle) is work which A & C did not undertake (tape and joint), and the names of the operatives for that work unsurprisingly do not appear on the list. I also mention in relation to that page that the job number is stated to be 6391. I cannot therefore be at all confident that every item on each of the allocation sheets relied on by Pan relates to work carried out by A & C operatives.
Pan was notified (as appears from what I have already said) of the 5% withholding by Mansell on or about 21 st February 2005. It had not, prior to then, made any complaint to A & C, and it may be that it had no knowledge of any defects which it could attribute to A & C. Nonetheless, Pan speedily sought to pass on the 5% retention to its subcontractors, including A & C.
On 8 th April a letter was sent to Pan by A & C's solicitors (part of which I will have to read) enclosing a statutory demand. The solicitors refer to the agreement for the work at Heathrow and state:
"Whilst we understand that there is no written agreement between you and our client there has been significant previous course of dealings between you and our client from May 2004. We understand that the process for our client to obtain payment from you is that our client would issue an invoice to you which you sign off or raise any queries with our client. Once the invoice has been signed off you then raise a sub-contract payment certificate to our client setting out the payment to be made.
We are instructed that you have recently sought to impose a 5% retention on the final balancing payment due from you to our client. We understand that the retention you are seeking to impose is £17,711.13.
We have carefully considered our client's position and have advised our client that you have no entitlement to unilaterally impose a retention upon our client. There is no documentary evidence, such as a written agreement, entitling you to make such a retention and there have been no retentions made during your previous course of dealings with our client. Accordingly we have advised our client that you are not entitled to impose a retention on the final payment…
Accordingly our client expected to receive the sum of £19,786.67 from you on 8 th March 2005. We are instructed that you made a part payment of £2,810.99 and that the sum of £16,975.68 therefore remains outstanding. In this regard we enclose a Statutory Demand for this sum by way of service."
The statutory demand is attached to that letter, showing a breakdown between two invoice numbers, one for just over £7,000 and one for £12,500. As I understand, they relate to Piers 5 and 6.
Whether in response to that letter or not, on 12 th April Pan wrote to Mr Bailey at A & C. It is a short letter in which he says:
"Following the receipt of the comprehensive snag list and supporting photographs, I would like to offer you the opportunity to attend to the works deemed to be the works carried out by A & C Interiors' operatives during the course of the project.
All items need to be attended to early next week [this letter was written on a Tuesday] to allow for any tape and jointing, and decoration works that may be required.
I enclose copies of the details and photographs. Can you please contact Keith Jones at the Heathrow office to arrange for you to view the snagging items.
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