FG Skerritt Ltd (“FGS”) was engaged by Caledonian Building Systems Ltd (“Caledonian”) pursuant to a sub-contract dated 22 May 2009 to design and build M&E works on a prison project.

On 31 December 2009, FGS submitted an invoice for the outstanding balance of the sub-contract sum, less half the retention. This was unpaid by Caledonian.

On 11 February 2010, FGS went into administrative receivership and FGS’s book debts were sold to a company, EDC. EDC is owned and controlled by the same company as FGS. Repair works were then carried out by Condor M&E (another company within the group) and/or EDC, which Caledonian paid for.

FGS submitted a further invoice for the remaining retention which was also unpaid by Caledonian. On 14 December 2010, FGS issued a notice of adjudication seeking payment of both invoices in the sum of £214,476.93. The Adjudicator awarded £184,794 (plus VAT) to FGS and confirmed that Caledonian could not set off its claims for remedying defects as it had not served a withholding notice.

FGS issued proceedings to enforce the Adjudicator’s award. Caledonian sought to stay the enforcement of the award on the basis that it had cross claims that could be applied by way of equitable set off as FGC was insolvent, relying on Rule 4.90 of the Insolvency Rules.

FGS argued that the Court ought not to delay enforcement of the Adjudicator’s award because FGS’ parent company had offered a guarantee as security in the event that final determination resulted in repayment being due to Caledonian.

On review of the Insolvency Rules, the Judge recognised that rule 4.90 might prevent the court from giving summary judgment, however in this case rule 4.90 was not applicable considering FGS was insolvent and not in liquidation.

The Judge considered that in the circumstances it was appropriate to grant a stay of execution but that a bond or guarantee provided by FGS’ parent company could be sufficient security for repayment of judgment sums and represent an alternative to a situation where it would normally be appropriate to grant a stay. However, in order to properly assess the worth of that guarantee, the Judge said that the company proffering the guarantee should be prepared to provide all the necessary information as to its current financial position. This meant that FCS should have disclosed management accounts for the parent company for the period ending 31 March 2013 without the court ordering it.

On production of all necessary financial information the Judge decided that the parent company's net current assets were sufficient. The Judge ordered summary judgment on sums in the adjudicator’s decision and declined to order a stay of execution provided that FGS’ parent company gave a guarantee relating to the sums due.