By way of sub-contract, Henry Construction Projects Limited (“HC”) engaged the Claimant, WRB (N.I) Limited (“WRB”) to “design, supply, install, test and commission the mechanical, electrical and public health systems for the development for a total sum of £2,180,00 plus VAT.” WRB is and always has been a dormant company and disputed that it was a party to the sub-contract, arguing that the true employer under the sub-contract is WRB Energy Limited. HC assert that they did contract WRB. Whilst HC did not seek to resist enforcement of the adjudicator’s decision, the parties were in dispute as to the sum which judgment should be entered and the issue being that HC sought a stay of execution of any judgment. 

In March 2022, WRB served a notice of adjudication concerning the value of its interim application. The sum of £1,757,483.36 had already been paid by HC but WRB claimed a further payment of £815,618.37. It was HC’s case that they overpaid WRB and sought a repayment of £563,395.65. In May 2022, the adjudicator decided that the sum owed to WRB was £120,655.35 plus interest, VAT along with the adjudicator fees and expenses. 

Pursuant to the adjudicator’s decision WRB sought payment, however they did not seek any VAT on the adjudicator’s valuation. WRB later stated they did not seek VAT on this payment “at this time”.  WRB also refused a stay. 

HC applied for a stay of execution and, by way of a cross-claim, sought payment from WRB. HC argued that if HC was successful in its counterclaim it was very likely that monies would not be paid because WRB was a dormant company.

Summary judgment was given for the sum of around £140,00.00 the reduction was because of VAT. The judge stated “given WRB’s dormant status… it seems unlikely that it is entitled to charge VAT on the works done.” Also, the judge commented on the fact “there is simply no evidence before the court to establish WRB’s entitlement to charge VAT.”

Accordingly, a stay was refused and Pepperall J was in agreement with Akenhead’s J’s judgment in Westshield Civil Engineering Ltd v Buckingham Group Contracting Ltd [2013] EWHC 1825 stating this was “the inevitable consequence of having placed a contract with a dormant company”. Pepperall J further goes on to say it would be “unfair and contrary to the spirit of the adjudication” to allow HC to escape liability based on WRB’s unchanged financial position. Accordingly, the court decided it was appropriate to enforce the adjudicator’s decision and not require a guarantee by WRB. 

Practical Implications

This case is a reminder that parties must ensure their claim and application for summary judgment are consistent, in this instance the judge stated where there are inconsistencies, an amended application for summary judgment would be helpful. Also, parties should be mindful that issues could arise if they enter an agreement with a dormant company.