Indigo Projects London Ltd v Razin & Anor

A company voluntary arrangement may bind a creditor without preventing the company from pursuing or defending claims. However, where an adjudicator’s decision made before the arrangement was approved was unpaid and determined only an interim payment by default, enforcing payment after approval may distort the arrangement’s mutual accounting. The payment would enter the general fund for creditors rather than being credited in the account between the parties. Enforcement should therefore be refused where it would operate unfairly against the creditor. The position may differ where the adjudication determined the parties’ entire dispute and established the final balance. A stay may alternatively be justified as a special circumstance under Civil Procedure Rules 1998, rule 83.7(4)(a).

The claimant sought summary judgment to enforce an adjudicator’s decision requiring the defendants to pay £177,662.72 under a construction contract. The decision followed the defendants’ failure to serve a Pay Less Notice and did not determine the value of the claimant’s work or the defendants’ cross-claims for defects and delay.

After the adjudication and the enforcement application, the claimant entered into a company voluntary arrangement. The defendants argued that the arrangement required the parties’ mutual claims to be accounted for by the supervisors and that enforcement would divert money into the general fund for creditors. The central issue was whether the unpaid adjudication decision should be enforced despite the subsequent arrangement.

1. Application dismissed. The adjudicator’s decision was not a valuation of the claimant’s entitlement or a determination of the parties’ account. It was, in substance, an interim payment ordered because no Pay Less Notice had been served.
2. A company voluntary arrangement takes effect when approved and binds persons entitled, or who would have been entitled, to vote. Its terms required the supervisors to account for mutual dealings and set off sums due between the parties.
3. The unpaid adjudication decision had to be considered in that accounting exercise, but it did not itself alter the balance. Had it been paid before the arrangement, it would have been treated as a previous payment on account. If paid after the arrangement, it would enter the general fund available for distribution among creditors. Enforcing it would therefore distort the required accounting and operate to the defendants’ detriment.
4. The reasoning in Westshield v Whitehouse [2014] Bus LR 268 and Bouygues v Dahl-Jensen [2001] All ER (Comm) 1041 supported that analysis. The observations in Bresco Electrical Services v Michael J Lonsdale and Cannon Corporate v Primus Build [2019] EWCA Civ 27 were consistent with a distinction between a limited interim adjudication and an adjudication determining the entire dispute.
5. Alternatively, the consequences of enforcement would amount to special circumstances justifying a stay under Civil Procedure Rules 1998, rule 83.7(4)(a). A partial payment or payment into court was inappropriate because the value of the competing claims could not fairly be assessed on the material available.