FTH LIMITED v VARIS DEVELOPMENTS LIMITED

Summary enforcement of an adjudication award obtained by a company subject to a CVA remains a fact-sensitive discretionary question. The court must consider whether enforcement creates a real risk that the defendant will lose security for a cross-claim. Where that risk exists, summary judgment may be refused under CPR Part 24.2, even though the award is valid.

A CVA does not by itself justify enforcement. The court should examine the arrangement’s purpose, the realistic recovery available to creditors, the treatment of cross-claims, the claimant’s solvency and the reliability and completeness of the financial evidence.

FTH, a company subject to a CVA, sought summary judgment to enforce two adjudication awards arising from a design and build contract. Varis accepted that the awards were valid but resisted enforcement, alternatively seeking a stay, because it had a substantial cross-claim arising from the alleged termination of the contract.

The court considered whether FTH’s CVA and current financial information justified summary enforcement, and whether there were special reasons for a stay under CPR r.83.7(4).

1. FTH was not entitled to summary judgment. The court accepted that adjudication awards obtained by a company subject to a CVA can be summarily enforced, but held that the question depends on the facts.

2. The proper approach was to ask whether there was a real risk that summary enforcement would deprive Varis of security for its cross-claim. If that risk existed, the court should exercise its discretion under CPR Part 24.2 to refuse summary enforcement. The same underlying principle applied to a CVA as to an insolvent liquidation case.

3. The CVA was not, on its face, designed to enable FTH to trade out of its difficulties. The anticipated dividend was no longer realistically achievable because the Filmer Road claim would produce no recovery. The likely dividend was substantially lower, the cross-claim had not been considered by the supervisors, and FTH’s financial evidence raised unanswered questions.

4. There was therefore a real risk that, if the adjudication award were later shown to be wrong, FTH would enter liquidation with little or no return for creditors, including Varis. The court accordingly declined summary judgment, alternatively finding another compelling reason not to grant it.

5. Although unnecessary to the result, the court stated that Varis would have been entitled to a stay under CPR r.83.7(4). The claimant’s probable inability to repay, the deterioration in its financial position since contracting, the absence of evidence that the deterioration was substantially caused by non-payment of the award, and incomplete financial disclosure all supported that conclusion.

First instance decision. No appellate history is stated in the judgment.