Adjudication enforcement and CVAs

Published on
2 min read

We previously reported on Bresco v Lonsdale, which confirmed adjudication is available to an insolvent company, and John Doyle v Erith Construction which demonstrates that enforcement of that award would be difficult, absent adequate security for any cross-claim. Both cases involved companies in liquidation.

The Court of Appeal in Bresco indicated different considerations might apply where the company was subject to a CVA, as it would be more fact sensitive – and one relevant factor might be whether permitting enforcement would enable the company to trade its way out of trouble. We do now have a reported example of enforcement being refused where the company is subject to a CVA.

In FTH Limited v Varis Developments the company sought to enforce two adjudication awards, but Varis asserted a cross-claim based on losses arising from their entitlement to terminate (which had been the subject of one of those). FTH proposed a CVA which was approved and it then sought to enforce the awards. Varis’ intention to oppose enforcement was known before the CVA was approved.

In refusing summary judgment, the court held the proper approach was to consider whether there was a real risk that summary enforcement would deprive Varis of security for its cross-claims. There were several reasons why that real risk existed here. Amongst those, the court did not consider the CVA was in fact designed to enable the company to “trade its way out of trouble”. 

The anticipated recovery at best was 56p in the £, but that depended on a recovery being made in another claim, and there was no such recovery possible. There was also no evidence FTH was continuing trading profitably either. The cross-claim had not been considered by the supervisors of the CVA and if it succeeded the CVA would fail.

FTH Limited v Varis Developments [2022] EWHC 1385

Mills & Reeve Sites navigation
A tabbed collection of Mills & Reeve sites.
Sites
My Mills & Reeve navigation
Subscribe to, or manage your My Mills & Reeve account.
My M&R

Visitors

Register for My M&R to stay up-to-date with legal news and events, create brochures and bookmark pages.

Existing clients

Log in to your client extranet for free matter information, know-how and documents.

Staff

Mills & Reeve system for employees.