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Volkerfitzpatrick Ltd (“VFL”) entered into a subcontract with Malin Industrial Concrete Floors Ltd (“Malin”) in April 2022. The works were completed and the final account agreed. The principal sum in issue represents the final retention, as still held by VFL at the time Malin went into administration. VFL denied that this sum was due to Malin and the parties agreed to adjudication as provided for in the contract and in accordance with the 1996 Act and Scheme.
The adjudicator decided that VFL should pay Malin £59,950 plus interest and VAT (“the Decision”). The adjudicator also dismissed VFL’s counterclaims in this adjudication on the basis that they had not provided any detail or evidence in support of them.
In the present case Malin applies by way of summary judgment to enforce the Decision.
The issues for the Judge to consider are (i) whether, as Malin contends, it is an appropriate exercise of the Court’s discretion to grant enforcement by way of summary judgment, despite its insolvent state, and (ii) the potential for that indebtedness to be off-set or extinguished by sums which might be found to be due by way of cross-claim.
The cross-claim
Malin argued that VFL “engaged in tactics to subvert the purpose of adjudication by lightly trailing a cross-claim, without engaging in the issues within the adjudication, thereafter to be able to prevent enforcement in an insolvency situation by reviving such issues as remaining unresolved”.
In respect of its cross-claims VFL provided two reports and a letter dated 4 October 20204 to Malin asserting that it has spent more than £65,000 on remedial works. The Judge notes that while the reports do not provide a specific opinion that there are or were defects in the flooring which are likely to be as a result of any default on the part of Malin, the report does raise the following points of substance: (i) cracks and crack repairs are clearly identified, (ii) the cracks are likely non-structural, restrained drying shrinkage cracks, these occur in circumstances of “high restraint stresses” during dry shrinkage and possible causes include those seemingly attributable to Malin’s workmanship.
Whilst the Judge rejected VFL’s submission that the report obviously speaks for itself and the cross-claim should be regarded as strong simply because money has been spent repairing cracks, he did find on the facts that there is sufficient potential for a cross claim for VFL’s objections to enforcement to be considered further (in the context of insolvency).
The approach to summary enforcement and the insolvency of Malin
The Judge notes that he is provided with scant evidence as to the extent of insolvency of Malin. The Judge likens Malin’s position to the company in Straw Realisations and, as such, VFL is no longer in the standard “pay now, argue later” position which would apply as a matter of course to an unimpeachable decision in favour of a solvent Claimant.
VFL argues that there should be no enforcement because of the administration combined with the fact that no security is offered (either for the claim itself or for the costs of any cross-claim). The Judge found that there is likely to be a sufficient level of insolvency here, such that there is a real risk that unfettered summary enforcement will deprive VFL of recourse to the retention monies as security for any cross-claim. In the Judge’s view there should not be a complete bar to enforcement but consideration should be given to imposing a stay.
The Judge therefore decided that summary judgment will be granted but stayed pending further order, with permission to Malin to apply to lift the stay unless satisfied by VFL within 3 months of the date of the Order that there is a prima facie case giving rise to a cross-claim for a level of damages with the potential of extinguishing the amount awarded by the Decision.
The Judge in this case was concerned not to encourage any party to attempt to “use insolvency tactically as a shield to avoid proper payment of an adjudicator’s award” and is a reminder of the interplay between insolvency and enforcement proceedings. The case is also a reminder of the importance of detailing any cross-claims.