Construction Disputes and Winding up Petitions

Construction Disputes – A Recent Case Study.

The NDP Team of construction insolvency solicitors advises clients making or defending claims who are faced with severe financial disruption due to construction disputes. The construction industry is characterised by disputes over late or non-payment. This article, penned by Christoper Cox, looks at a recent case (April 2016) in which COD Hyde Limited, the employer, failed to pay its contractor Space Change Management Limited, and was served with a winding up petition. Ultimately, The Court did not restrain the petition, suggesting that employers trying to avoid payment need very good reasons for so doing.

Construction Disputes

The Details of This Construction Dispute

COD failed to respond to Space Change Management’s applications for payment and missed 3 interim payments that it was alleged were due to be made under contract. Most contractors in this situation would start the process of getting paid with an adjudication. In this case, however, Space Change issued a statutory demand for payment.

COD rejected this demand, whereupon Space Change issued a winding up petition, with COD applying to the Court for an injunction to restrain the presentation of the petition. The risks inherent in the contractor, Space Change, proceeding this way are well known. However, in so doing it immediately switched the emphasis onto COD who, if it could satisfy the court that the debt was disputed on the basis of a bona fide cross claim against Space Change, would likely get its injunction granted, along with costs, possibly on an indemnity basis.

The Court’s Decision

The Court’s decision was to dismiss COD’s application to restrain the winding-up petition. In the context of construction dispute law, the Court needed to look at the “pay now, litigate later” effect of the absence of the payment and pay-less notices that had not been issued by COD. However, the striking thing about this case is that the Court dismissed COD’s  arguments in relation to the cross claim, both on a legal and factual level.

This cross claim involved an argument that Space Change Management’s conduct, whereby they suspended work prior to issuing the statutory demand, amounted to a repudiatory breach which allowed the COD to repudiate the contract.  Surprisingly, the court decided to summarily determine the rights and wrongs of the case, with the outcome being success for Space Change Management and COD failing to get its injunction.

Our Comments on this Construction Dispute

One must question whether this outcome could be repeated.  It seems as though the Court was not provided with sufficient particulars of COD’s cross claim, and held that merely reciting a failure by the Space Management to suspend works without reasonable cause did not provide enough to rule in COD’s favour.

The lesson is clear: if you have a bona fide cross claim, you need to set it out in detail or you risk not getting injunctive relief. In this case, COD had not served their payment and pay less notices on time.

Contact us if you are involved in a Construction Dispute

Our construction dispute and insolvency solicitors are highly experienced in disputes of this nature, where non-payment is at the heart of the dispute. If you are involved in a construction dispute, contact us or call us on 0121 200 7040 for an initial chat and the chance to assess the merits of your position and the options available. The sooner you contact us, the more we can do to help.

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