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I am much obliged to Alexander Dain of Contract & Construction Consultants, Bristol for sending me the High Court judgment in Mead General 好色先生TV vs Dartmoor Properties. It ended up in court because Dartmoor would not obey the adjudicator鈥檚 decision to award Mead 拢347k. Dartmoor wanted a stay, a pause, on having to pay because Mead was subject to a company voluntary arrangement (CVA) with its creditors.

Mead had agreed to build a housing development in Oakhampton, Devon, under the JCT Intermediate Form. A dispute then arose and Peter Simpson, a RICS adjudicator, was called in to decide it. He ordered Dartmoor to pay up.

Dartmoor鈥檚 managing director replied that he was wrong. He was wrong to award an extension of 27 weeks and wrong to order that 23 of those weeks carried loss and expense. Dartmoor said it intended to overturn these decisions in arbitration. The snag was that if Mead was in serious financial straits, and the arbitrator reversed the adjudicator, then there was a danger that it would be unable to repay the award.

The judge had no truck with the complaint that the adjudicator had made the wrong decision. 鈥淭he paying party will often complain that the adjudicator has awarded too much or should have awarded nothing at all.鈥� All that has to wait until the arbitration. As to the CVA, the judge asked if any other adjudication case had come to the High Court asking for a stay? No. This is the only one.

The mere fact of the CVA is not enough to imply that Mead would be unable to repay an award by the arbitrator once the case is reheard. Instead, look at its trading position

There has been a case where the successful party in the adjudication later went into insolvent liquidation. In that case, the insolvency rules operated to prevent judgment. In the case of a company in administrative receivership, judgment can be entered, but not if the facts indicate that the party would not be able to repay any sums.

So, what effect does a CVA have? The mere fact that it is in existence does not by itself imply that Mead will be unable to repay an award, should the arbitrator so decide. Instead, it is necessary to look at the circumstances of the CVA and Mead鈥檚 current trading position. For example, it may well be that Mead鈥檚 problems were the result of Dartmoor鈥檚 failure to pay the sums awarded.

Credit: Simone Lia

So, what鈥檚 the score here? Mead is a relatively small company. Its 拢1.6m contract with Dartmoor was its principal turnover, and when Dartmoor started to pay less than was being claimed and sometimes paid nothing at all, Mead鈥檚 financial difficulties began. Mead鈥檚 accountant gave that evidence and the builder鈥檚 managing director also explained how he had told his suppliers and subcontractors and other creditors what trouble he was having. He assured them that Mead had good prospects, provided Dartmoor would pay up. When a CVA is agreed, there is an independent supervisor. He concluded that Mead had a good prospect of success. So, the likely future for this small outfit is that it will be able continue to trade successfully.

The judge decided that Dartmoor should pay up the whole of the 拢347k, plus interest at 8% since the award date. Mead鈥檚 financial troubles, he said, had been directly caused by Dartmoor鈥檚 failure to pay the award and its failure to pay sums due. Mead could trade its way out of its difficulties, so there was no reason to believe that it would not pay back some or all of the 拢347k if an arbitrator says they were overpaid.

It may well be that Mead鈥檚 problems were the result of Dartmoor鈥檚 failure to pay the sums awarded

Let me mention one sting in the tail and make one challenge. Mead was awarded the costs of having to come to court to enforce. Those were just short of 拢20,000, but the judge would only award 拢15,000. The reason was that he was presented with three lever-arch files of information. Too much, he said. The only worthwhile point was the application to stay because of the CVA. So he detected unnecessary costs. I bet Mead鈥檚 advisers were covering all bases because their opponent was not represented. Second-guessing what鈥檚 going to happen makes life difficult.

As for the challenge, it鈥檚 this. If this matter is going to go on to an arbitrator, let鈥檚 make it move at a swift pace, shall we? The original payer Dartmoor will not want to drag its feet. The payee will be fed up. The arguments are well rehearsed. Time? One month. I mean it.