Midas Construction Limited (in liquidation) v Harmsworth Pension Funds Trustees Limited

When enforcing an adjudicator’s decision obtained by a company in liquidation or administration, security must protect the responding party as nearly as practicable as if the company were solvent. The court must assess the actual issues likely to arise in final proceedings, allowing credit for work already undertaken and limiting security to likely recoverable costs rather than all costs incurred.

Security should not ordinarily be staged so as to dictate the order in which the responding party advances its claims. The court may revisit the amount of security as the issues, pleadings and costs become clearer.

The claimant sought enforcement of an adjudicator’s decision requiring payment of £1,551,528 under a construction subcontract. The claimant was in administration and proposed enforcement subject to security for the defendant’s potential final proceedings, including claims concerning the same and a separate construction contract.

The defendant challenged the proposed security as inadequate and opposed staging which would require it to pursue the claims sequentially. The court also rejected an alleged champertous abuse of process. The principal issues were the appropriate level of security and whether enforcement security could properly control the defendant’s conduct of its potential claims.

1. Enforcement and security. The claimant had a valid adjudicator’s decision for £1,551,528. Enforcement was appropriate subject to security protecting the defendant against the costs of final proceedings.
2. In assessing security, the court must examine the actual issues likely to be determined and reject generic estimates detached from those issues. Credit must be given for work already undertaken in the adjudication or elsewhere, because that work may reduce the cost of final proceedings. Security is required for likely recoverable costs, rather than all costs likely to be incurred: Styles & Wood Limited (in administration) v GE CIF Trustees Limited [2020] EWHC 2694 (TCC).
3. The safeguards should place the responding party as nearly as practicable in the position it would occupy if the claimant were solvent. That objective does not require complete indemnity, but it requires protection against the practical disadvantages created by insolvency: Meadowside Building Developments Ltd (in Liquidation) and 12-18 Hill Street Management Company Ltd [2019] EWHC 2651 (TCC).
4. It would be unfair to stage security in a way which dictated whether the defendant pursued the Sanctus claim, the Print Hall claim, or both together. The defendant was entitled to determine how best to advance its claims, subject to appropriate timescales.
5. On the evidence, appropriate security was £150,000 for the Sanctus claim and £400,000 for the Print Hall claim. The court recognised that the figures could be reviewed after costs budgets were exchanged and case management hearings had taken place. The parties were invited to agree an appropriate order.