TATE BUILDING SERVICES LTD V B&M MCHUGH LTD [2014] EWHC 2971(TCC)

Judgement date: 11 July 2014

SUMMARY

In this case the Court granted a Stay of Execution of part of a judgment which it had awarded by way of enforcement of an adjudicator’s decision. Having previously entered into a Creditors’ Voluntary Arrangement, the claimant’s finances had now recovered considerably. However, the Court held that there was still a high or significant risk that by the time the defendant’s action to reverse the adjudicator’s decision was brought to trial, the claimant would probably not be in a position to repay the full amount of the adjudicator’s award. Accordingly, the adjudicator’s decision was enforced, to the extent that the sums due exceeded £150,000. Of the £150,000 in respect of which a stay of execution had been granted, the defendant was ordered to pay £75,000 into Court.

Technology and Construction Court, Mr Justice Edwards-Stuart

BACKGROUND

On 2 May 2013 Tate Building Services Limited (“Tate”) was engaged by B&M McHugh Limited (“B&M”) as a sub-contractor to carry out works in relation to a refurbishment of toilets at Liverpool Street Station (the “Contract”).

During the works, Tate informed B&M that it could not afford to fund the works and the two parties entered into negotiations to discuss how the works could continue.

A third party (“Washroom”) was responsible for manufacturing the bespoke cubicles, which were crucial to the completion of the works. Washroom walked off site and only returned when B&M agreed to pay Washroom for their services directly. B&M alleged that it agreed to do so on the basis that Tate agreed that these works would then be excluded from the Contract. Tate denied that it made such an agreement.

Apparently unknown to B&M, Tate entered into a Creditors’ Voluntary Arrangement (CVA) on 20 November 2013. The CVA proposed that Tate would pay its creditors just under 54 pence in the pound.

The works were substantially completed by 17 December 2013, after which Tate issued a claim document under which it claimed £296,606. B&M disputed the claim and the matter was referred to adjudication. In the adjudication Tate argued that the Contract was a lump sum contract and that there was no agreement to exclude the Washroom works. The Adjudicator’s decision was given on 29 May 2014. He concluded that Tate was entitled to be paid the full lump sum of £438,398 together with a further £65,503 in respect of variations. After taking into account sums already paid, he awarded Tate £268, 868. Of this B&M paid only £33,196.

On 30 May 2014 B&M issued proceedings against Tate seeking in effect to reverse the Adjudicator’s decision. Shortly thereafter Tate issued proceedings in which Tate sought summary judgement to enforce the unpaid balance of the Adjudicator’s award.

B&M did not oppose summary judgment as such but made a cross-application for a Stay of Execution of any judgement, given that Tate had entered a CVA. B&M submitted that Tate’s financial position was such that it would be unlikely to be able to repay any sum if the Adjudicator was found to be wrong. Tate submitted that its financial position had improved considerably since the CVA such that it would be in a position to repay the Adjudicator’s award.

ISSUES

The Court was asked to decide:

• whether to grant the application by B&M for a Stay of Execution of any judgement.

DECISION

The Court held that:

• that although Tate’s financial position had improved considerably since entering into the CVA, there was still a high or significant risk that by the time B&M’s action was brought to trial, Tate would probably not be in a position to repay the full amount of the Adjudicator’s award. However, this was not to say, and the Court did not accept, that Tate would not be able to pay anything at all;
• accordingly summary judgement should be awarded to permit enforcement to the extent that the sums due exceed £150,000;
• these sums (i.e. those in excess of £150,000) were to be paid within 14 days; and
• of the £150,000 B&M was directed to pay £75,000 into Court within 14 days.