WRB (NI) Limited v Henry Construction Projects Limited
In this case Henry Construction Projects Limited (“Henry”) entered into contract with a non-trading dormant company. It happens. Occasionally, in the rush to win work, due diligence gets forgotten.
In the Adjudication Enforcement hearing, the judge had no sympathy for the fact that if Henry paid WRB (Northern Ireland) Limited (“WRB NI”), Henry would not, in all probability, get its money back.
WRB NI was dormant, did not trade, and apparently had never traded.
At this point, I should say MJD act for a client who likewise entered into a contract with a WRB dormant compnay. Our client however took a different approach to Henry and managed to get back some money from the WRB Group.
As the judge said at paragraph 26.2 of his judgment:
Secondly, it was Henry Construction that resisted the argument that the true subcontractor was WRB Energy Limited. It is not clear whether it considered there to be some forensic advantage in taking that line, but it has essentially made its own bed.
In an earlier adjudication commenced by WRB Energy Limited, Henry appears to have argued that it was not in contract with WRB Energy Limited but instead was in contract with WRB NI. Henry itself was arguing that it was in contract with a dormant company.
By arguing that it was in contract with a dormant company, presumably Henry was able to get the first adjudication commenced by WRB Energy Limited kicked into touch. The consequences of the argument raised by Henry was that a new adjudication was commenced by the dormant company. As the judge said, Henry had made its own bed.
We do not know the merits of the claim in the second adjudication commenced by WRB (NI), but Henry lost. Matters were about to get a lot worse for Henry.
WRB NI were properly advised any enforcement claim may be stayed because of an insolvency risk. WRB NI therefore offered a guarantee from another company within the WRB Group.
In our opinion the provision of a guarantee in such circumstances is often sufficient provided the financial covenant of the guarantor is strong enough. However, the judge said no guarantee was necessary and that Henry must pay up. That, we suggest, was harsh but a risk to which Henry were always exposed. A link to the judgement is here
How did MJD Solicitor’s client succeed in getting money when it likewise entered into contract with a WRB dormant company?
On behalf of our client, we issued proceedings against WRB (UK) Limited. We were aware the company was dormant on Companies House but were in possession of a Purchase Order endorsed in the name of WRB (UK) Limited. Our client was aware insolvency was always a risk. To overcome insolvency risk, we ensured that we were not left with a judgment against a dormant company, and so we also secured a joint judgment against a trading company in the WRB Group. A simple solution to a potentially tricky issue.
There are many important lessons from this case. It is critical to understand who you are in contract with. Adjudicators’ decisions will invariably need to be complied with. If you are to take forensic advantage of particular circumstances, then there needs to be strategic thinking into the likely consequences of such forensic advantage.
Matthew Dillon, MJD Solicitors
10 July 2023.
