Posted: 11/09/2024
The deployment of advice from a barrister within an adjudication is a common tactic, often in an attempt to add ‘weight’ to a party’s submissions before the adjudicator. However, what if a party only provided the ‘good parts’ of the advice; would this be acceptable? This was one of the points considered in Henry Construction Projects Limited v ProMep Limited [2024] EWHC 1825 (TCC).
The court also considered some interesting points in relation to the operations of creditor’s voluntary arrangements (CVA). However, this article focuses on the adjudication enforcement aspects of the decision.
Henry Construction Projects Limited had engaged ProMep as its mechanical and engineering contractor on several different projects, running to approximately £68 million in value. In early 2021, the relationship between the two parties began to deteriorate, which resulted in both parties asserting that they were entitled to terminate their various contracts. The ‘Stanbridge Contract’, which was the subject of the adjudicator’s decision, was terminated on 20 July 2021, when ProMep purported to accept Henry’s repudiation.
Due to financial issues, likely to be blamed on Henry’s conduct, ProMep entered into a CVA on 25 October 2021. Clause 8.3 of the CVA listed the assets which would be available to form a dividend to pay ProMep’s creditors. Claims against Henry regarding each of ProMep’s final accounts and associated claims for damages arising from the claimed wrongful terminations were not listed as assets.
On 28 March 2022, Henry submitted a claim within the CVA for three of the projects which ProMep had worked on, in the sum of approximately £3.5 million. No claim was made for the Stanbridge Contract, and Henry’s three claims were accepted by the CVA’s supervisors.
On 27 July 2022, the CVA’s supervisors gave formal notice that the CVA had been successfully completed.
On 18 November 2022, ProMep commenced an adjudication against Henry, for the value of work at termination and damages arising from Henry’s wrongful termination of the Stanbridge Contract.
Henry argued that all claims had been compromised by the CVA, due to the operation of insolvency set-off, and provided counsel’s advice to support that submission. In response, ProMep provided previously obtained counsel’s advice on the issue of whether its claims had been compromised by the CVA, but submitted only an extract of this advice, and stated that it ‘set out ProMep’s understanding of [counsel’s] view on the legal position’. ProMep’s counsel had been unable to provide a direct response to Henry’s counsel’s advice as they were on maternity leave.
The adjudicator issued his decision, agreeing that ProMep’s claims had been excluded from the CVA, and, therefore, had not been compromised. The adjudicator went on to decide that Henry had repudiated the contract and ProMep were entitled to £90,380.49.
Henry did not pay and ProMep subsequently issued enforcement proceedings. Henry’s position in the enforcement proceedings was that the adjudicator’s decision had been obtained by a fraudulent misrepresentation of the advice ProMep had received from its counsel, and this advice was material to the adjudicator’s findings. However, there had been no suggestion of fraudulent misrepresentation within the adjudication itself. Henry also issued Part 8 proceedings for declaration as to the correct meaning of the CVA, but the substance of those findings is not considered in this article.
Was there a material fraudulent misrepresentation?
The court held as a matter of fact that there was no fraudulent misrepresentation. It was made clear when the extract was provided that it reflected ProMep’s understanding of the advice, and that it had not been approved by counsel. Notwithstanding this, the court considered that the summary did include counsel’s overall advice on the merits, which had been expressed in conditional rather than unequivocal terms. It was not fatal that ProMep had not included counsel’s views on the alternative arguments.
More fundamentally however, the court doubted if ProMep’s actions could amount to a material fraudulent misrepresentation as counsel’s advice, by its nature, is not evidence of fact; it was akin to legal submissions. In considering any counsel’s advice, whether in full or partial, an adjudicator must decide for themselves what they consider to be the correct position in law.
The impression given by the court is that the decision would have been enforced even if there was a finding of fraudulent misrepresentation. The court noted the judgment in SG South v Kingshead Cirencester, that where allegations of fraud could have been made within the adjudication itself, the decision will normally be enforceable, notwithstanding the allegations as these have, in effect, been adjudicated upon.
Other key points to note
Henry had also tried to suggest that the Part 8 proceedings should be dealt with initially, on account of them being issued first, and, if successful, would amount to a complete defence. This was given short shrift by the court because:
Further, the adjudicator’s conclusions on the meaning of the terms of the CVA and the operation of insolvency set-off, even if wrong in law, were both errors within his jurisdiction, having been raised in argument by both parties. Therefore, they were not reasons to decline enforcement .
While the above outcome is possibly not surprising, it serves as another good reminder of some of the fundamental principles of adjudication enforcement, including how the court should deal with competing Part 7 and Part 8 claims, and that arguments generally ought to be made to the adjudicator as soon as possible.
It may also provide some comfort to litigators that submissions as to what the ‘correct’ interpretation of the law is in adjudication, even if a long shot, are unlikely to be considered fraudulent in nature, such that they may render the adjudicator’s decision unenforceable.
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