South Coast Construction Ltd v Iverson Road Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Coulson |
| Judgment Date | 19 January 2017 |
| Neutral Citation | [2017] EWHC 61 (TCC) |
| Docket Number | Case No: HT-2016-000330 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 19 January 2017 |
[2017] EWHC 61 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice,
Rolls Building,
Fetter Lane, London, EC4A 1NL.
The Hon Mr Justice Coulson
Case No: HT-2016-000330
Ms Lucie Briggs (instructed by Ashfords LLP) for the Claimant
Mr Crispin Winser (instructed by Fladgate LLP) for the Defendant
Hearing dates: 18 and 19 January 2017
Introduction
The claimant has two applications before the court. The first in time is a relatively standard application pursuant to CPR Part 24 for summary judgment to enforce the decision of an adjudicator. The total sum claimed is £868,728.47, together with interest, fees and costs. The second application has been triggered by the belated discovery that the defendant has issued no fewer than three Notices of Intention to Appoint an Administrator ("NOI"), with the third notice giving rise to a 10 day moratorium which expired only at the close of business on 18 January, the day fixed for the enforcement hearing. That application, pursuant to Rule 43(6)(b) of Schedule B1 of the Insolvency Act 1986, is for permission to proceed with the enforcement hearing.
It obviously makes sense to deal with that second application first because, if I decided it against the claimant, that would be the end of the matter. Accordingly, having set out the background in Section 2, I address the law relating to the moratorium in Section 3 and set out my analysis and conclusions in Section 4. On this application, I should add that, in order to avoid any technical difficulty created by the expiry of the moratorium at the end of the very day listed for the hearing, I am giving this Judgment on the following day, 19 January, having allowed both parties to make brief submissions as to the up-to-date position following the expiry of the 10 day period. As I note below, although the position has changed overnight, there are a number of reasons why I still need to address the application for permission to continue with the proceedings.
Thereafter, I deal with the enforcement application, dealing with the applicable principles in Section 5, and setting out my analysis of the application in Section 6 below. I am very grateful to both counsel for the clarity of their submissions.
BACKGROUND
Pursuant to a contract made in about September 2013 and incorporating the JCT Intermediate Form, the defendant engaged the claimant to carry out significant building works at a site at 163, Iverson Road, London NW6. The contract administrator worked for a subsidiary company of the defendant: unsurprisingly perhaps, the adjudicator found that he lacked the necessary or appropriate impartiality properly to fulfil that important function.
Throughout the currency of the works, the adjudicator found that there were problems with the supply of design information to the claimant. Apparently, this did not cause immediate difficulty because the defendant paid some prolongation costs, and did not deduct liquidated damages. However, the various difficulties reached such a pitch that, in June 2016, having completed phases 1 and 2, the claimant suspended work for non-payment of sums due.
Thereafter, on 1 July 2016, the defendant issued an instruction purporting to omit the remainder of the works, a non-completion certificate, and a letter confirming their intention to deduct liquidated damages. Again unsurprisingly, the adjudicator was to find that the instruction to omit the remainder of the works was a repudiatory breach of contract.
Also on 1 July, the defendant issued a Payless Notice which purported to deduct from sums otherwise due to the claimant some £844,330.60 by way of liquidated damages. The Notice also valued the work already carried out by the claimant at a figure that was considerably lower than that which the claimant had already been paid. In response, on 12 July, the claimant issued an application for payment totalling £1,003,479.21. This was based on an overall value of the works that was some £2.5 million higher than the sum calculated by the defendant. It subsequently submitted a final account claim in similar – but not precisely the same – figures which identified a net sum due to the claimant of £996,418.01. The defendant did not pay any part of this amount.
Accordingly, on 5 September 2016, the claimant issued a notice of adjudication. The details of the dispute being referred to the adjudicator were described in these terms:
"The dispute referred to adjudication is the additional amount of monies South Coast Construction Limited ("SCC") is entitled to be paid by Iverson Road Ltd over and above monies received to date pursuant to a JCT Intermediate Building Contract with Contractor's Design between Iverson Road Limited and SCC for new build construction of 33 apartments and 3 houses at Iverson Road, London, NW6 2RB and the rights and obligations associated therewith. SCC also seek payment of interest for late payment."
The sum sought in the notice of adjudication was the £996,418.01 referred to above, together with an additional payment of £139,433.29, being a claim for loss of profit on the works which had been wrongfully omitted.
Following the usual exchange of voluminous responses and rejoinders in the adjudication, the adjudicator provided his decision on 21 November 2016. The decision runs to 240 paragraphs. In essence, the adjudicator decided that:
(a) The claimant was entitled to be paid the bulk of the final account sum, and the loss of profit. The total found due was £868,728.47 set out at paragraph 1 above.
(b) The claimant could not have completed the works any earlier than it did because of the failure on the part of the contract administrator to provide the necessary information in a timely manner. In consequence the claimant was entitled to a full extension of time.
(c) The defendant was not entitled to deduct any liquidated damages.
Although, pursuant to the terms of the contract, the sums found due by the adjudicator should have been paid forthwith, those sums were not and have still not been paid by the defendant. The claimant therefore commenced these proceedings and sought summary judgment to enforce the adjudicator's decision. I gave directions for the service of all relevant evidence, dates for bundles and skeleton arguments, and fixed the hearing for 18 January 2017. To start with, the defendant complied with those directions and provided a witness statement from Mr Simpson, the defendant's solicitor, resisting enforcement on the ground that, in deciding the extension of time claim, the adjudicator exceeded his jurisdiction. That was the issue which the claimant and the court thought was the matter to be decided at the hearing on 18 January.
However, after close of business on 16 January, when the defendant was in breach of the order because it had not provided a skeleton argument or agreed a completed bundle for the hearing, the defendant's solicitor sent a peremptory letter to the court, enclosing an NOI dated 4 January 2017. The letter noted that the moratorium under the Insolvency Rules ran for 10 clear business days and therefore did not expire until the end of 18 January. The letter stated that the hearing date "must be vacated and the action discontinued".
It has since been disclosed that the NOI of 4 January was in fact the third such NOI served by the defendant and that there were two previous notices dated 29 November and 13 December 2016. For reasons which have not been explained, neither of those first two notices were drawn to the attention of the claimant or the court. No administrator was appointed under either of these two NOIs. The third NOI was not disclosed until after close of business on 16 January, despite the fact that the defendant's solicitor was aware of it on 5 January 2017. As I made plain to Mr Winser in argument, I take a dim view of these events.
The position today (19 January) is that, at a meeting early this morning, the directors of the defendant resolved to put the company into liquidation. A liquidator has been appointed. Mr Winser told me expressly that no stay of these proceedings was sought, by the liquidator. This means that the moratorium has come to an end. On one view, therefore, it is unnecessary for me to deal with the claimant's application for permission to continue the proceedings. However, it is plainly desirable that I do so because:
(a) The parties devoted most of yesterday morning to the issue;
(b) The issue has wide ramifications, and may be relevant to other cases in the months to come;
(c) There is an application by the claimant for the costs of the application for permission to continue, which means that I am obliged to express a view about the merits of that application in any event.
THE APPLICATION FOR PERMISSION TO CONTINUE: THE LAW
The relevant parts of Schedule B1 of the Insolvency Act 1986 provide as follows:
" 43. Moratorium on other legal process
(1) This paragraph applies to a company in administration.
(2) No step may be taken to enforce security over the company's property except—
(a) with the consent of the administrator, or
(b) with the permission of the court.
(3) No step may be taken to repossess goods in the company's possession under a hire-purchase agreement except—
(a) with the consent of the administrator, or
(b) with the permission of the court.
(4) A landlord may not exercise a right of forfeiture by peaceable re-entry in relation to premises let to the company except—
(a) with the consent of the administrator, or
(b) with the permission of the court.
(5) In Scotland, a landlord may not exercise a right of irritancy in relation to premises let to the company except—
(a)...
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