The killer blow

Botes Building Ltd bit the dust and left a load of subcontractors and suppliers licking their wounds. Mind you, it’s not only suppliers and subcontractors that turn out to be creditors. Sometimes it is employers that catch it in the neck when a firm goes belly-up. On 28 June Botes Building went into administration. It hurt. A turn of events in the few weeks leading up to that day might well have nudged Botes over the threshold.

Its contract at Park Royal, north London, with Hillview Industrial Developments (UK) Ltd was the subject of a late completion dispute. Hillview made a demand on Botes to be paid liquidated damages for failure to hit certain sectional completion dates. Botes wouldn’t pay so an adjudicator was appointed. He awarded a fraction short of £300,000 should wing its way from contractor to employer. Now it might not hurt an £84m turnover enterprise to pay up. Sting yes, cripple no. Botes was supposed to pay on 3 April. It didn’t.

Hillview triggered court proceedings to enforce payment. Within days the judge wrote ordering service of evidence and argument. The hearing was set for 26 May. Hillview wanted a court order to persuade Botes to pay up. Botes made a counter move. It told Hillview’s solicitors it was making a counter-claim for £200,000 on the final account, which was issued by now, but unpaid. Botes decided to press for that sum by issuing a claim in the High Court for “summary judgment” on their final account. Its solicitors had spotted a good argument under the JCT standard form, which is worth a shot. The judge wrote to say that he would hear Botes’ argument on 26 May at the same time as the Hillview application to enforce the adjudicator’s award. Botes stood a chance of shelling out only a net £100K. “Hold hard” said Hillview to the judge; we don’t have enough time to weigh up this latest move by Botes. We won’t be ready by 26 May. Okay, said the judge; he would put Botes claim into the diary for 23 June but, damn it, keep the Hillview enforcement date for 26 May.

So the scene was set for Botes to fend off enforcement on 26 May since its counter attack would come on a month later. Now then what did the judge say on 26 May? At that hearing Botes accepted it had no complaint with the award of adjudicator.

Botes was supposed to pay the £300,000 on 3 April. It didn’t

“The normal practice is to give summary judgment” … “but in the particular circumstances of this case, Botes says the court, ought not do so at this stage”. Botes argued the court could stay the flow of money due today because of the likely order to flow money the other way soon.

The judge was comfortable with the notion that adjudication was “not invented to cause injustice”. He accepted too that in appropriate cases an injustice can be dealt with by a stay of money, but the test for all that was limited to cases where there was a “risk of manifest injustice” in enforcing an otherwise good adjudication award. The prima-facie position is that the award will be obeyed and enforced by the court, because the loser must comply. He cannot withhold payment on the grounds a party will recover money in a future adjudication or court hearing based on different issues.

So what manifest injustice might arise from Hillview receiving £300,000 today then repaying £200,000 next month? The judge asked what risk there was of Hillview not being able to repay. There was no evidence of risk. So the judge could find no manifest injustice on which to exercise his discretion to stay the payout from Botes.

As to Botes bringing its knock-down argument to court one month later, well sadly Botes went down the pan on that very day. So its lawyer’s argument goes undecided.