LEVI SOLICITORS LLP v DAVID FREDERICK WILSON

On a rehearing of a challenge to the admission of another creditor’s proof in a company voluntary arrangement, the creditor asserting the claim bears both the legal and evidential burdens of proving it.

Where a construction contract makes certification a condition precedent to liability, absence of a certificate does not prevent the court from determining what should have been certified. Insolvency provisions in standard JCT terms may replace ordinary interim and final payment machinery, if that is their proper construction. A contractual period for preparing an insolvency account is not necessarily strict. The court held that a late account could still establish a repayment claim, but the statutory payment-notice mechanism in section 110B of the Housing Grants, Construction and Regeneration Act 1996 did not apply to that account.

Levi Solicitors LLP, a creditor of Farrar Construction Limited, challenged the supervisor’s admission of JKR Property Development Limited’s proof in the company’s CVA. JKR’s claim arose from an overpayment under a JCT Minor Works contract and included liquidated damages. The amount admitted was accepted to be overstated, leaving £128,921.70 in issue.

The principal questions were whether the contract’s insolvency provisions superseded its ordinary payment provisions; whether an account under clause 6.7.3 was a condition precedent to liability and had to be provided within three months; and whether section 110B of the 1996 Act supplied an alternative route to payment or proof.

1. Rehearing and burden of proof. An application challenging a supervisor’s decision on a proof is a rehearing. The court considers all relevant evidence afresh and determines whether the claim is established and in what amount. The creditor asserting the claim therefore bears the legal and evidential burdens. The fact that a rival creditor brought the challenge did not alter that conclusion.
2. Effect of the insolvency clauses. On the true construction of the JCT Minor Works terms, the Company became Insolvent when the CVA was approved on 1 September 2016. Clauses 6.5 and 6.7 then applied automatically, whether or not JKR served a termination notice, and operated to the exclusion of clauses 4.3 to 4.8. The insolvency clauses supplied a substituted procedure for determining the balance due after completion and making good defects.
3. Nature and timing of the account. The account under clause 6.7.3 was not required to be provided within three months as a strict condition precedent. The account was not stated to be final or conclusive, and a strict time bar would unjustifiably exclude a recognised claim for the balance of account. JKR could provide the account and claim the balance at any time before expiry of the limitation period, subject to contractual variation or estoppel.
4. Statutory payment notices. Section 110B of the Housing Grants, Construction and Regeneration Act 1996 concerns failure to give a notice by a payer or specified person within five days after a contractual payment due date. Clause 6.7.3 specified only a date by which an account was to be provided, not a payment due date. Section 110B therefore did not apply. In any event, JKR could not invoke it for its own failure to provide the contractual account.
5. Disposition. The eighth interim and final valuation was not a compliant clause 6.7.3 account, nor was JKR’s proof itself such a statement. Nevertheless, JKR was a contingent creditor and its proof was to be accepted in the revised amount of £128,921.70. The court declined to decide the unnecessary question concerning clause 4.8.

First-instance decision. The judgment records earlier proceedings concerning a separate trust claim, including rejection of an appeal by the Court of Appeal in November 2019, but those proceedings were not the subject of this application.