Westshield Ltd v Whitehouse & Anor

An adjudicator’s decision may be jurisdictionally valid and prima facie enforceable even where the successful party is subject to a company voluntary arrangement. A CVA does not prevent the company from pursuing adjudication of a pre-CVA debt.

However, where the CVA binds the parties and requires mutual credits, debts and dealings to be accounted for, the court should not summarily enforce the adjudicator’s decision before that accounting. The adjudication remains provisional, and the parties’ claims and cross-claims must be reduced to a balance under the CVA.

Westshield sought summary judgment to enforce an adjudicator’s decision requiring the Whitehouses to pay £132,667.56. Westshield was subject to a CVA which had come into effect in December 2010. The Whitehouses had not registered a claim in the CVA, but relied on an arguable counterclaim for defective work and other matters arising from the construction contract.

The Whitehouses abandoned their challenge that no dispute had crystallised. The principal issues were whether the CVA prevented adjudication, whether the adjudicator’s decision could be enforced before the supervisors accounted for the parties’ mutual dealings, and whether enforcement should be stayed.

1. Jurisdiction and adjudication. The CVA did not prevent Westshield from pursuing adjudication of a pre-CVA debt. A company subject to a CVA can continue business and sue or be sued, subject to the CVA’s terms. The adjudicator therefore had jurisdiction, and the decision was prima facie enforceable.
2. Effect of the CVA. Under Insolvency Act 1986, section 5(2), the CVA bound the Whitehouses even though they had not participated in the creditors’ meeting or registered their claim. The CVA conditions were to be construed as contractually binding between the parties.
3. Mutual dealings and summary judgment. The Whitehouses had raised a sufficiently credible, although late and imperfectly supported, counterclaim. Their contractual claim and Westshield’s claim arose from mutual dealings before the CVA. Condition 23(e) required an account of what was due from each party and payment only of the resulting balance.
4. The position was analogous to Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000] EWCA Civ 507. An adjudicator’s decision is provisional and may be reopened in the parties’ final dispute-resolution process. The CVA’s accounting mechanism meant that summary enforcement before the account was taken would serve no useful purpose and could defeat the operation of the CVA.
5. The application for summary judgment was dismissed. Further steps in the proceedings were stayed until further order, pending the supervisors’ account. The question whether Westshield could make a further summary judgment application after the accounting was left open.
6. No stay of execution issue arose because summary judgment was refused. Had it arisen, the court would not have granted a stay on the evidence of Westshield’s trading position and compliance with the CVA.