The Pursuer, Barry Trentham, was a building contractor, and the Defender, Lawfield Investments was a property developer. The Pursuer was claiming payment of valuation 17, which had not been paid by the developer. No valid section 111 Notice was given, and so the builder sued for the sum of £364,864.49 (valuation no. 17).

The contract was the SBCC, but the payment provisions had been amended so that payment was based upon the cost of the works, plus 7½ % in respect of the sub-contracted works, and 5% for the builder’s costs. Money had been lent to the developer by the Dunbar Bank, and the bank’s surveyor checked the valuation in the role of fund’s monitoring surveyor.

The warrant issued by the Court contained a summons on inhibition for dependence on the action and diligence. The Pursuer alleged that there was a serious risk of the Defender’s insolvency because of the net liability in the audited accounts, and also because of the borrowing against that sole development. The Defendant challenged that claim on the basis of the Human Rights Act, stating that it had adequate funds and referring to the published accounts.

Lord Drummond Young held that if a defender could put forward credible evidence that there was no risk of its insolvency, then the onus was placed back on the pursuer to justify the continuance of the injunction. The Defendant showed by virtue of its published accounts that it was solvent with assets. However, the Pursuers examined those accounts, and revealed that the published accounts were misleading. The Judge accepted those discrepancies, concluding that there was a significant risk of insolvency for 7 reasons. These included,

1. that the audited balance did not disclose surplus assets over liabilities;
2. the company was only carrying out one single development;
3. that whole development had to be sold at the prices assumed in the work in progress calculation;
4. the audited balance sheet made no allowance for bank interest payable in the future;
5. it was uncertain how a considerable loan was to be repaid to Mr Trentham;
6. the audited balance sheet included cash at the bank of £115,223, but the balance was only £20,462.40 (without explanation); and finally
7. a liability for VAT had not been taken into account. This in itself would allow the pursuer to retain the inhibitions

The Defender then argued that the valuation 17 claim was disputed, and that a withholding notice in the sum of £1 million had been served against valuation 18. The Defender argued that this cancelled the present claim. The Judge recognised that the existence of a counterclaim would amount to a defence. Nonetheless, the Judge took into account the Defendant’s offer to settle the final account, which demonstrated that regardless of valuation 17 and 18 the Defendant accepted that a “liquid” sum was accepted as owing. He therefore refused the Defendant’s motion to recall the inhibition.