Shepherd engaged Hare in December 2008 to fabricate and erect steelwork for a new retail development, Trinity Walk, in Wakefield. The Employer was Trinity Walk Wakefield Limited ("Trinity"). Hare's sub-contract contained a "pay when paid" clause: clause 32. It was drafted in similar language to s113 of the Act, and included four alternate circumstances where Trinity would be considered insolvent, which made specific reference to the Insolvency Act 1986.

Hare issued applications 5 and 6 to the total value of £996,683.35. On the basis of clause 32, Shepherd had issued withholding notices in respect of each valuation. Hare sought declarations that the withholding notices were invalid and Hare was entitled to be paid the amounts contained in applications 5 and 6. Hare's disputed the validity of the withholding notices as Trinity became insolvent by a route not expressly identified in clause 32, by self-certifying administration. This route to insolvency was introduced by amendments to the Insolvency Act 1986, which were brought in in 2003, five years before the sub-contract was entered into.

Hare submitted the withholding notices were not valid, as Trinity did not become insolvent by one of the four routes described in clause 32. Hare submitted that whilst clause 32 made reference to the "… Insolvency Act 1986 …", clause 29.3 referred to "… the Insolvency Act 1986 or any amendment or re-enactment thereof …". Shepherd submitted that it would be an absurd decision to interpret the clause so narrowly, and any and all relevant amendments to the Insolvency Act 1986 should also come under the scope of clause 32.

The Judge held that Hare's submission was correct, for three reasons:

1 The plain meaning of the words in clause 32 produced a cogent and clear result. The four routes to administration identified in clause 32 were still possible routes. They had not been made redundant by the amendments to the Insolvency Act 1986, and the clause still operated;
2 That clause 32, a pay when paid clause, amounted to a form of exclusion clause:
"… the court is required to ensure that Shepherd are kept to the four corners of their bargain with Hare and that a clause of this nature is not rewritten to expand the circumstances in which Hare might find themselves (through no fault of their own) significantly out of pocket because of a financial failure up the contractual chain."
3 The sub-contract was entered into five years after the Insolvency Act amendments were brought in. Further, clause 29.3 envisaged future amendments, whilst clause 32 did not. The judge thought that as both parties accepted that they knew about the amendments prior to entering into the sub-contract, it should be seen as a deliberate decision on the part of Shepherd not to amend clause 32 to that effect. If the contract had been entered into before the amendments, then the result may have been different.

The Judge went on to say that if he was wrong on the above, he would still find against Shepherd using the contra proferentem rule. As Shepherd had put forward the clause in the form of contract issued to Hare, and there was doubt as to its meaning, the Judge should interpret such an ambiguity against them.

The Judge therefore granted the declarations sought by Hare.