Henry Construction Projects Ltd v ProMEP Ltd EWHC 1825 (TCC)

This case is a reminder that clear and precise drafting in Company Voluntary Agreements (CVA) is necessary, especially when defining the scope of insolvency set-off and addressing future claims. The precise contractual language will determine whether or not a claim can be pursued or adjudicated post-CVA.

Background

Henry engaged ProMEP as an MEP subcontractor on a project at Standbridge Earls. Unfortunately, the Standbridge project encountered significant challenges, leading both parties to accuse each other of repudiatory breach.

In October 2021, ProMEP entered into a CVA. During this process, Henry substantiated debts totalling over ￡3.4 million, which were acknowledged by the CVA supervisor. As a result, Henry received ￡240,000 from the CVA.

In November 2022, ProMEP initiated adjudication proceedings against Henry, claiming ￡887,208 related to Standbridge development delays. Henry contended that this claim was offset by the provisions of the CVA. Additionally, Henry counterclaimed for ￡825,000. The adjudicator ruled that ProMEP’s claim fell outside the scope of the CVA’s specified claims but awarded ProMEP a payment of ￡90,000. Henry subsequently filed a Part 8 claim seeking a declaration that the CVA had settled all claims between the parties, including any claims ProMEP might have against them. In response, ProMEP initiated a Part 7 claim for summary judgment to enforce the adjudicator’s decision.

Court Decision

The court found that the CVA did not settle all current and future claims between the parties. The CVA's primary effect was to eliminate ProMEP’s existing debts, enabling it to continue operations and potentially pursue future claims. Unless these future claims were explicitly included in the CVA, they remained assets of the company. Consequently, Henry could not assert that the CVA resolved these claims in the same manner as an insolvency would.

In its submissions, Henry contended that ProMEP had fraudulently misrepresented its counsel’s opinion on whether the CVA covered the claims, suggesting that this misrepresentation influenced the adjudicator’s favourable finding. The Judge determined that the summary of counsel’s opinion was not fraudulent, and even if it were, it was immaterial; the advice merely represented a legal argument relevant to the adjudicator’s decision-making process. Furthermore, the Judge noted that these points should have been raised during the adjudication, meaning Henry could not now use them to resist enforcement of the adjudicator’s decision.

The Part 7 application by ProMEP was accepted, and the Part 8 application by Henry was rejected.

GEORGE WILLIAM GIBBS LLB (HONS) LLM

[email protected]

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