The Technology and Construction Court in England and Wales recently dealt with an interesting point in relation to the enforcement of an adjudicator’s decision in favour of a dormant company. The judgment may be of interest to those involved in adjudication in Ireland as it demonstrates the issues that can arise with dormant companies in the context of adjudication.

In WRB (NI) Limited v Henry Construction Projects Limited [2023] EWHC 278 (TCC), the parties entered a construction contract in relation to a development in North London. Henry Construction Projects Limited (‘Henry’) was the main contractor and engaged WRB (NI) Limited (‘WRB’) as its sub-contract to design and construct the mechanical and electrical packages. At the time of the sub-contract, WRB was and continued to be a dormant company. In an Irish context s365 of the Companies Act sets out the parameters of a dormant company as follows:

‘(2) … in respect of the year concerned the company is dormant that is to say, during that year—

(a) it has no significant accounting transaction, and

(b) its assets and liabilities comprise only permitted assets and liabilities.’

WRB issued an adjudication in relation to an interim application and an adjudicator made an award in its favour. Henry did not comply with the decision. WRB brought enforcement proceedings. Henry did not resist enforcement but sought a stay of execute of the court’s judgment on the grounds that, if it was successful in a cross claim for liquidated damages (which was not raised in the adjudication but would form part of a subsequent adjudication), it would be highly unlikely that monies paid on foot of the adjudicator’s decision would be repaid. WRB argued that Henry took the ‘risks inherent in doing business‘ with a dormant company.

Pepperall J accepted it was ‘probable that, should the court refuse a stay and Henry Construction later establish its own cross-claim, WRB would be unable to repay the judgment sum.’ However, summary judgment was entered in WRB’s favour and the stay was refused. After reviewing the leading case on stay of execution, Wimbledon Construction Company Limited v Vago [2005] EWHC 1086, and in particular a claimant’s financial position at the time the contract was made, Pepperall J stated that:

26.1 … upon its own case, Henry Construction chose to place the sub-contract with a newly formed dormant company. The risk that it now complains of is … the “inevitable consequence” of having placed this sub-contract with a dormant company. It is “the result for which it contracted” … it would be unfair and contrary to the spirit of the adjudication regime to allow Henry Construction now to escape its liability to meet an adjudication award on the basis of WRB’s essentially unchanged financial position.

The above demonstrates the importance of carrying out proper due diligence on the status of a proposed contracting party prior to entering a contract. On the facts in this case, even though the court was aware that monies paid on foot of the adjudicator’s decision would unlikely be recovered in Henry’s subsequent adjudication, nevertheless, the court was willing to enforce the adjudicator’s decision in favour of the dormant company and unwilling to stay the enforcement of the judgment.

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Photo of Paul Hughes Paul Hughes

Paul Hughes is a senior associate in A&L Goodbody’s Construction & Engineering group. Paul has extensive experience in construction disputes and acts for employers, contractors and sub-contractors across multiple sectors, including, civil engineering, residential, commercial, educational, refurbishment, repair and maintenance and energy. Paul…

Paul Hughes is a senior associate in A&L Goodbody’s Construction & Engineering group. Paul has extensive experience in construction disputes and acts for employers, contractors and sub-contractors across multiple sectors, including, civil engineering, residential, commercial, educational, refurbishment, repair and maintenance and energy. Paul has expertise in disputes concerning extensions of time, loss and expense, defects, variations, payments, final accounts, true valuations, termination and asbestos. Paul has experience of dealing with disputes arising under the standard forms of contract, including, JCT, NEC, FIDIC, PWC & RIAI and ancillary agreements. Paul holds a PhD (Law) and is a solicitor in both Ireland and England and Wales. He is also a Fellow of the Royal Institution of Chartered Surveyors (FRICS), the Society of Chartered Surveyors Ireland (FSCSI), the Chartered Institution of Civil Engineering Surveyors (FCInstCES) and the Chartered Institution of Arbitrators (FCIArb).