The High Court has ruled on a payment dispute that arose between the main contractor and a subcontractor on Modus’s £150m Trinity Walk shopping centre development when it went into administration in March.
In December 2008, the development’s main contractor, Shepherd Construction, engaged subcontractor William Hare to manufacture and erect steelwork at the
The subcontract included a “pay-when-paid” clause, under which that the subcontractor is not paid until the main contractor has been paid by the developer.
Under the terms of the clause, Hare would not be paid if the developer became insolvent in four alternative situations, namely: (i) a court administration order; (ii) the appointment of an administrative receiver; (iii) insolvent liquidation; and (iv) the making of a winding-up order by the court.
However, in March 2009, Hare issued applications to Shepherd for two payments of £569,601 plus VAT and £427,081 plus VAT.
At the same time, Trinity’s financial position worsened because its backer, Anglo Irish Bank, demanded a £50m cash injection and Trinity’s directors placed it into administration by way of a self-certifying administration.
Accordingly, Shepherd withheld the sums due to Hare on the ground of Trinity’s insolvency.
Hare applied to the court for a declaration that since Trinity had not become insolvent by one of the four alternative routes stated in the agreement, it was not insolvent for the purpose of the pay-when-paid clause and Hare was entitled to be paid.
Giving judgment for Hare, Coulson J held that, on the true construction of the clause, Hare was entitled to be paid.
The judge declined to rule on a separate but similar dispute between Shepherd and construction firm CR Reynolds.
William Hare Ltd v Shepherd Construction Ltd Technology and
Sean Brannigan QC (instructed by Addleshaw Goddard, of Leeds) appeared for the claimant; Alexander Nissen QC (instructed by Gosschalks, of
