Statutory Demands following Adjudication Proceedings

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In Shaw v MFP Foundations the Court had to consider whether the issuing of a Statutory Demand was an appropriate way to enforce an Adjudicator’s Decision. MFP adjudicated against Mr & Mrs Shaw, and obtained a Court Judgment in respect of the Adjudicator’s Decision. It then served a Statutory Demand on the Shaws, which the Shaw’s sought to set-aside on the basis that they had a substantial cross-claim for defective and incomplete work. This was the subject of an ongoing arbitration.

At the first hearing the judge refused to set-aside the Statutory Demand, so the Shaws appealed. MFP cross-appealed on the basis that the Court should not exercise its discretion to set-aside a Statutory Demand where it is based on a judgment enforcing an Adjudicator’s Decision as this was consistent with the “pay now argue later” ethos of the Construction Act. The Shaw’s appeal was successful. The Court said it should have regard to all the circumstances of the case when exercising its discretion and the fact that the judgment related to an Adjudication should not affect its ability to exercise that discretion. In the circumstances of this case it was appropriate to set-aside the Statutory Demand.

Comment: Whilst a Statutory Demand (or Company Insolvency Procedure) may seem an attractive and/or tactical option to enforce an Adjudicator’s Decision, consideration should be given as to whether it is appropriate in the circumstances of the case.