Midas Construction Ltd v Harmsworth Pension Funds Trustees Ltd
[2025] EWHC 1122 (TCC)
Midas, a company in administration with no notice of distribution issued, sought enforcement of an adjudicator's decision, in the sum of £1.5 million, subject to a stay with proposed conditions. Midas had, in fact, entered into two building contracts with Harmsworth and had a decision in their favour on the second contract too.
The Administrators had engaged Pythagoras Capital to collect the debts owed by Harmsworth. Harmsworth did suggest initially that the enforcement claim was champertous (champerty prevents parties with no previous interest in a case from financing it with a view to sharing the profits). However this suggestion was not pursued.
The real issue for the court was the question of Midas providing security for the costs of any final proceedings that Harmsworth may bring to overturn the adjudication decision(s). What was a reasonable amount?
Deputy Judge Bowdery said that, in assessing the amount of security, one must look carefully at the actual issues to be determined in final proceedings and reject a generic estimate of likely costs divorced from the actual issues. The court will also give credit for work already done in the adjudication and elsewhere. This is likely to mean that less costs are required than when a matter is considered, and pleaded afresh with witness and expert evidence being gathered for the first time. A court will allow security for the likely recoverable costs rather than likely incurred costs. This is how the sum for security for costs is set generally even outside the context of security as a condition for enforcement of the adjudicator’s decision.
Midas had suggested that, particularly bearing in mind there were two potential claims (the two projects), the security should be provided in stages. This would mean that security in relation to the first adjudication/project be provided now, and security in relation to the second adjudication/project being provided later. Harmsworth said that Midas were trying to constrain and restrain their opportunity to advance their claims as they see fit. The practical purpose of Harmsworth’s proposed litigation could only be to overturn the adjudication decisions, since there was no prospect of them making any monetary recovery given the status of Midas. Accordingly, Harmsworth should be permitted to advance their claims in the manner which it considered might best achieve that objective, which would include permitting it to advance one claim first or to run both claims as part of one action.
The deputy judge agreed with the approach of Mr Justice Constable in Meadowside Building Developments Ltd (in Liquidation) v 12-18 Hill Street Management Company Ltd (See Dispatch, Issue 233 [1]). Here, the deputy judge had noted that a liquidator has a statutory obligation to collect the companies' debts. He also noted that no party is entitled in the context of security for costs' type orders to a complete indemnity in respect of their costs; it is always protection in relation to such costs' order as might be or is going to be ordered on the premise that the costs' protection becomes relevant, so typically around 60%.
Bowdery DJ noted here that, as near as possible, the safeguards (i.e. the proposed security) must seek to place the responding party (i.e. Harmsworth) in a similar position to if Midas was solvent. That should be the aim. Therefore, here there could be no suggestion that security be staged. The aim should be to provide security which was sufficient to permit Harmsworth to bring all its claims as it saw fit (subject to timescales). It would be wrong and unfair for Midas to be able to dictate by insisting on the staging of any security how Harmsworth should advance its claims against them.
It was more difficult to assess the amount of security which should now be provided. The deputy judge noted that Harmsworth did have the right to come back to court to obtain further security if the deputy judge were to underestimate the amount that was appropriate to be ordered at this stage. The parties produced witness statements explaining their position on the costs, which were considered to be helpful to some degree. However, the deputy judge (perhaps inevitably) viewed the figures advanced by Midas as being too low (especially when compared against their own cost budgets), but viewed the figures advanced by Harmsworth as being too high. Bowdery DJ decided to set the security at £150,000 and £400,000 in respect of each project, a figure in between those put forward.
The result was confirmation that Midas, an insolvent party, was able to enforce the adjudicator’s decision, subject to the agreed stay, but Midas (through its third-party funder) also had to provide significant security to Harmsworth, in respect of the costs likely to be incurred in seeking a final court judgment in respect of that decision.
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