The phrase ‘hoist with his own petard’ came to mind when I delved into the world of Hancock and Oakeshott. While the great wordsmith Bill Shakespeare might not have had WhatsApp in in mind when penning Hamlet, the more I read and hear about Hancock & Oakeshott, the more this phrase comes to mind. This is because the disclosure of thousands of WhatsApp messages is, I would suggest, the “inevitable consequence” of an earlier agreement between (some might say) a controversial MP and a high-profile journalist for a new book, i.e. NDA or no NDA the current disclosure was always going to happen.

The same inevitability happens in commercial life where one party enters into a contract with a financially unsound party, a dispute arises which goes to adjudication and the adjudicator awards the financially unsound party a substantial sum. At the same time, the other party says it is all unfair because, amongst other things, the true picture is that (i) it has already overpaid for the work, (ii) it has a substantial cross-claim, and (iii) if, in the meantime, it has to pay even more money it will never get any of this back because the payee is insolvent.

That is, one might conclude, the “inevitable consequence” of contracting with such a financially unsound party and the relatively recent TCC decision in WRB (NI) Ireland v. Henry Construction Projects Limited (10 February 2023) certainly supports such a conclusion.

WRB (NI) Ireland v. Henry Construction Projects Limited

Briefly, the facts were as follows:

• 30 March 2022 – WRB served its Notice of Adjudication seeking a payment of £815,618.37 but HC claimed it had overpaid WRB and wanted a repayment of £563,395.65.
• 18 May – the adjudicator decided WRB was owed £120,655.35 plus interest and his fees of £15,646.50 plus VAT.
• 19 May – WRB sought payment of these sums although it got its maths wrong.
• HC did not pay and asked for an invoice which WRB issued and then re-issued after HC pointed out the original invoice was incorrect.
• 8 July - WRB sought summary judgment of the adjudicator’s decision.
• 15 September – the judge gave summary judgment in favour of WRB.

HC’s Application for a stay of enforcement

• HC cross-applied for a stay on the basis that WRB owed HC liquidated damages and other costs amounting to £754,495.72 and a fresh adjudication would be started soon, in August 2022.
• HC also argued that WRB’s “parlous financial standing” (it was a dormant company) meant that any monies paid to WRB would not be repaid to HC if it won its own fresh adjudication.
• WRB argued that a stay (i.e. allowing HC to delay or not enforce the adjudicator’s decision) would defeat the purpose of adjudication and it was HC that chose to contract with a dormant WRB.
• WRB also offered a guarantee of repayment by a separate WRB company if HC’s fresh adjudication proved successful.

Judge’s Decision

The judge declined to exercise the discretion to grant a stay of enforcement despite the fact that WRB would be unable to repay any money if HC’s fresh adjudication was successful. He also declined to require the provision of a repayment guarantee by a separate WRB company.

This was because:

• HC had chosen to enter into a contract with a dormant company and the risk of being unable to repay HC was an “inevitable consequence” of doing so (Herschel Engineering Ltd v. Breen Property Ltd (unreported 2000)). As such, it would be unfair and contrary to the policy underlying construction adjudication to permit HC to escape its liability where WRB’s financial position was unchanged (Granada Architectural Glazing Ltd v. PGB P&C Ltd (2019)).
• In addition, it was HC that insisted this dormant company was the correct contracting party and not a separate associated company that had offered the repayment guarantee.
• HC had also not made use of the time to establish its own alleged entitlement to £754,495.72, i.e. in other words HC had had weeks/months to start and finish its own fresh adjudication but had not done so.

Conclusion

This case illustrates, once again, that if you choose to enter into a contract with a financially unsound party, it will be very difficult to avoid having to comply with an adjudicator’s decision in favour of that party. This is regardless of the fact that (i) you may have a separate cross-claim for substantially more money and (ii) by the time you establish this by way of a fresh adjudication, the other party may have gone ‘pop’, leaving you as one of a long list of unsecured creditors. In short, the court will take the view that such a financial risk was and is an “inevitable consequence” of contracting with a financially unsound party.

The solution is relatively simple namely, to carry out credit checks and obtain references against the other party before signing on the dotted line and having done so, to ensure you give the relevant payment notices, pay less notices etc as required by the contract.

WRB v. Henry Construction also reminds us that if you do have a substantial cross-claim you must take steps to prove this; it is not sufficient to say you have a substantial cross-claim that will, in due course, show a repayment is due, you have to get a move on and start your own fresh adjudication.

In summary, HC had chosen to take a risk in entering into a contract with a dormant company and could not now claim it was all rather unfair.

Now back to those WhatsApp revelations and where is that auto delete function for my mobile phone?