Summary: 

1    The claimant Alun Griffiths Contractors Ltd (“AGC”) were engaged by the defendant Carmarthenshire County Council (“CCC”) to carry out the civil engineering and construction works on the A48 from Swansea to Carmarthen. AGC sought summary judgment in the sum of £3,316,487.55 in order to enforce a previous adjudicator’s decision. CCC disputed the value of the works and wanted to refer the issues to a true value adjudication. CCC applied for a stay on enforcement proceedings which was the focus of this case.

2    CCC sought to argue that AGC was cash-flow insolvent and that their holding company’s guarantee was inadequate to safeguard its position. 

Analysis:

3    In addressing CCC’s application to stay Pepperall J affirmed the established principles in Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC 1086 (TCC). In this matter HHJ Coulson QC, as he then was, summarised the applicable principles of what amounts to ‘special circumstances’ under CPR 83.7(4). 

4    Pepperall J noted that it is common ground that where there are concerns as to a party’s solvency an application may be defeated by offering a bond or guarantee which provides sufficient security, citing FG Skerritt Ltd v Caledonian Building Systems Ltd [2013] EWHC 1898 (TCC).  

5    Pepperall J noted that AGC is a wholly owned subsidiary of Tarmac Holdings Ltd (“THL”), who are themselves owned by CRH plc. AGC’s most recent filed accounts do indeed demonstrate a deteriorating financial position and the mounting losses have left it balance sheet insolvent. Therefore, the offer of a guarantee from THL was a sensible one and it was for the Judge to decide the adequacy of that guarantee from THL. 

6    Pepperall J ruled that the guarantee from THL was indeed valid. He noted that the existence of net current liabilities within a holding company (i.e. one which does not hold cash) does not mean that they cannot pay their debts when they are due, just that cash may indeed be tight. Moreover, he also noted that in this specific circumstance the ultimate parent company, CRH plc, has a very substantial positive cash position. 

7    After ruling out the Defendant’s application the court decided that CCC’s conduct throughout the proceedings, most notably, at one stage promising to pay the sum in question before then employing delay tactics, was worthy of ordering indemnity costs on the stay application. 

Points to Note:

8    A parent company guarantees is likely to stand the test of adequate security, even if the parent’s ‘cash on hand’ may be tight. 

9    In addition to this, this case provides another firm reminder that unreasonable and obstructive actions such as promising to pay and then rescinding this offer to pursue a fanciful stay application will leave you with a heavy costs exposure.