The facts of Enterprise v McFadden Utilities are a little convoluted, so bear with us.
Enterprise had a contract with Thames Water. Enterprise sub-contracted some of the works to Tony McFadden Limited. When the contract between Thames
Water and Enterprise was terminated, Enterprise terminated the sub-contract with Tony McFadden Ltd.
Subsequently, Enterprise entered into three other contracts with Tony McFadden Ltd.
Tony McFadden Ltd then went into Administration and the Administrators lodged a claim with Enterprise for £2.6m in respect of unpaid works. No payment was made and Tony McFadden Ltd went into Liquidation. The Liquidators re-stated the claim. Enterprise responded with a counterclaim of £3m in respect of alleged overpayments. The Liquidators then assigned the claim to McFadden Utilities - a separate company - under rule 4.90 of the Insolvency Rules. Under rule 4.90, where there have been dealings between a creditor and debtor, the only claim which can be assigned is for the “net balance”, i.e. taking into account all claims and cross-claims. McFadden Utilities then launched adjudication proceedings against Enterprise – which Enterprise contested on the grounds of jurisdiction. The question was whether McFadden Utilities was entitled to Adjudicate. The answer was no:
- the claim for a “net balance” must relate to all four contracts between Enterprise and Tony McFadden Ltd. This was fatal because (a) only one dispute under one contract can be referred to adjudication at any one time; and (b) one of the four contracts was not a construction contract;
- as Enterprise had a cross-claim, rule 4.90 required the Liquidator’s to be joined as a party to the action. This was fatal because tripartite Adjudication is not allowed;
- rule 4.90 envisages one set of proceedings in order to provide a final and binding result. This was fatal because it was at odds with the temporarily binding nature of Adjudication decisions.
COMMENT:
There was nothing to stop McFadden Utilities pursuing the claim through the Courts, and interestingly the Judge suggested that given the value of the dispute and the voluminous nature of documents, the dispute may not be suitable for adjudication in any event. Proper consideration should therefore be given as to whether adjudication is or is not an appropriate dispute resolution strategy.
