11. Stay—Company Voluntary Arrangement—moratorium

See Rossair Ltd v Primus Build Ltd27

Primus was engaged as main contractor on the construction of a London hotel and employed Rossair as
the mechanical installation sub-contractor on the project. The sub-contract documents provided
for any dispute to be referred to adjudication and for the Scheme to apply, subject
to a provision that the adjudicator should be nominated by the Royal Institute of Chartered
Surveyors (RICS).

A dispute arose between the parties in respect of two interim payment applications.
Rossair referred the dispute to adjudication and Mr Peter Aberley was appointed
adjudicator by RICS.

On 21 June 2017, the adjudicator published his decision, subsequently corrected pursuant to
paragraph 22a of the Scheme and re-issued on 26 June 2017. He directed that Primus should pay
Rossair the sum of £353,726.02 in respect of the interim applications plus interest in the sum
of

£7,953.56. Additionally, the adjudicator directed Primus to pay 85% of his fees amounting to
£6,768.13 plus VAT.

Primus failed to pay any of the sums directed and on 6 July 2017 Rossair commenced
proceedings, issuing an application to enforce the adjudication decision by way of summary
judgment, under CPR 24.

Primus submitted an acknowledgment of service, indicating that it wished to defend the application
but failed to submit any evidence save for a letter to the court dated 8 August 2017 stating it
would not be represented at the hearing of the application on 10 August 2017 but inviting the court
to take into account the contents of the witness statement of Mr Neil Graham Sammes. The statement
was not served on Rossair until 9 August 2017, the day before the hearing. In his statement Mr
Sammes opposed the application for summary judgment on three grounds.

(1) Jurisdiction

O’Farrell J. found that the adjudicator was correct to hold that he did have jurisdiction to act.
It was common ground that the sub-contract documents had been issued by Primus to Rossair on or
around 15 October 2015, that they contained terms and conditions including a provision for
adjudication (as described above). There was a dispute between the parties as to whether
Rossair had made amendments to the sub-contract documents at a later date. The adjudicator was
right to find that any disputed amendments to the sub- contract did not affect his jurisdiction as
it was not alleged

that any of the amendments would affect the adjudication agreement or the adjudication rules to be
applied.

(2) Stay

The second question was whether the proceedings in the claim should be subject to a stay. Mr
Sammes stated that Primus proposed to enter into a Company Voluntary Arrangement (CVA) and
the relevant documents concerning the proposal had been filed in the Companies Court. The proposal
for the CVA was not exhibited to the witness statement and there was no indication
within the witness statement of the terms on which the CVA had been proposed. There was
also a discrepancy between the letter dated 8 August 2017, which stated that Primus was in a CVA,
and the witness statement of Mr Sammes, which merely proposed that it enter into a CVA. The
court did not have an informed explanation as to the status of Primus.

O’Farrell J. considered the Insolvency Act 1986 and the Insolvency Rules 2016. Section
1A of the Insolvency Act provided that “Where the directors of an eligible company intend to
make a proposal for a voluntary arrangement, they may take steps to enforce a moratorium for the
company.” Even assuming Primus was an eligible company, there was no evidence or indication that it
had taken steps to obtain a moratorium. It followed that it was to be assumed by the court that no
steps had been taken.

The Insolvency Rules 2016 made provision for a company to provide in its proposal for a CVA the
nature and demands of the company’s liabilities. Paragraph 2.15 of chapter 4 of the Insolvency
Rules provided for notice of the beginning of any moratorium to be published in the Gazette and
delivered to the nominee and to the company. There was no evidence before the court relating to
publication of a moratorium. The court was satisfied that Primus Build had not taken any steps
to bring into effect a moratorium in respect of the CVA.

Therefore, and although the court had power to stay the proceedings, or any judgment in
respect of an adjudicator’s award where the Defendant was unable to pay the judgment sum, it was
only in very exceptional circumstances that such power would be exercised. There was no evidence
before the court to justify the staying of the application or the Part 24 summary judgment itself.

(3) Double payment

It was suggested that a judgment against Primus would put it in danger of having to pay the interim
applications twice, it being alleged the sums had already been paid to Rosssair by the Employer.
There was evidence that the contract between the employer and Primus had been
terminated, that the employer had supported Rossair by way of cash flow. However, the evidence of
Rossair, not contradicted by Primus, showed that the support was by way of loan, which had been
repaid. That removed any question of Rossair recovering the outstanding payments twice.

The court ordered a summary judgment to be entered for Rossair in the sum claimed
plus further interest and Primus was also ordered to pay Rossair their share of the adjudicator’s fee and the costs of the action and the application.

 

This article was originally written and published on the internet by Slater Heelis on 07/06/18.

 

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