Checking the Identity and Status of the Relevant Parties when entering into a Construction Contract

Bexley Beaumont Construction Associate Brandon Silver discusses WRB (NI) Ltd v Henry Construction Projects Ltd [2023] EWHC 278 (TCC) and the implications this case has on (i) the importance of checking the identity and status of the relevant parties when entering a construction contract and (ii) the importance of the principle ‘pay now, argue later’.

In this case, the TCC had to decide whether to enforce an adjudicator’s decision awarding WRB (NI) Ltd (“WRB”), a dormant company registered in Northern Ireland, the sum of £120,752.14 including interest against Henry Construction Projects Ltd (“HCPL”), a main contractor.

An earlier adjudication had determined, in favour of HCPL’s argument, that HCPL had entered into a subcontract with WRB and not WRB Energy Limited (“WEL”), an active company that carried out electrical installation works, and which was part of a group of companies that included WRB.

HCPL did not resist WRB’s application for summary judgment to enforce the adjudicator’s decision but rather applied for a stay of execution (a court order to temporarily suspend the execution of the court judgment) whilst it established its alleged entitlement to its cross claim totalling £754,495.72. This was on the basis that HCPL was concerned that “WRB's parlous financial standing mean[t] that it is highly probable that any monies paid now will not be repaid in the event that Henry Construction should succeed in its own claim”.

The TCC enforced the adjudicator’s decision, and dismissed HCPL’s application for a stay on the basis that:

1. The risk that any monies paid to WRB will not be repaid in the event that HCPL should succeed in its own claim is the inevitable consequence of HCPL having chosen to enter into a subcontract with the dormant company.

2. It would be unfair and contrary to the spirit of the adjudication regime to allow HCPL to escape its liability following the adjudication award because of WRB’s unchanged financial position as a dormant company.

3. HCPL had “made its own bed” following its resistance in an earlier adjudication to an argument that the true subcontractor was WEL.

This case, therefore, demonstrates (i) a dormant company can enter into a construction contract, provided, amongst other things, it has the legal capacity and authority to do so, and (ii) the importance of checking the identity and status of the parties to a construction contract. The case also reiterates the importance of the statutory policy introduced by the Housing Grants, Construction and Regeneration Act 1996, which is ‘pay now, argue later’.

Legal disclaimer

The matters contained within this article are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, either express or implied, is given as to its’ accuracy, and no liability is accepted for any errors or omissions.

Before acting on any of the information contained herein, expert advice should always be sought.

©Brandon Silver, February 2023