Outer House allows proof to determine creditors of AWPR construction venture

Of the original 18 defenders in the action raised by AWPR Construction Joint Venture Ltd and others, all but the first, sixth, seventh, and fifteenth defenders withdrew or indicated they no longer insisted on having their claims be ranked. Payment of the fund in medio had been made by the pursuer into court, comprising the sum of £1,084,691.

The case was heard by Lord Armstrong.

Invoicing services

The first defender, Everprime Ltd, trading as Skyblue, had previously entered into liquidation. It insisted that the claims of the remaining defenders were irrelevant et separatim lacking in specification and ought not to be remitted to probation. This would entitle the first defender to be ranked and preferred to the whole of the fund in medio.

From the commencement of the AWPR project to January 2017 the first pursuer had contracted directly with third parties, including the sixth, seventh and fifteenth defenders, for temporary labour. However, as the scale of the project increased, the invoicing was outsourced to the first defender. This contract concluded when the first defender went into liquidation in January 2018.

The first defender averred that, from January 2017 onwards, the other defenders were aware that they would only be able to provide temporary labour for the project if they entered into contracts with the first defender and issued their invoices to them. The first pursuer would then forward the relevant amounts to the first defender for distribution, with a fee of two per cent of the net payment.

On that basis, the first defender argued that the referable contractual position was that the sixth, seventh and fifteenth defenders had contracted with it, and thus had no in medio claim against the first pursuer.

Each of the other defenders, in turn, argued that the first pursuer’s arguments were not well founded and that decree should be granted in their favour, entitling them to be ranked and preferred to the portion of the fund referable to them.

The sixth defender submitted there had been no novation or delegation of contract in relation to its original contract with the first pursuer, and the first defender’s services were administrative only. Against the background of the sixth defender’s factual averments of lack of knowledge of the terms of the contract between the first pursuer and the first defender, and its denial of entering into any contract with the first defender, the relevancy of the sixth defender’s claim could not properly be determined by reference to the terms of the contract between the first pursuer and the first defender.

The seventh defender, in addition to advancing similar arguments on novation, submitted that the first defender’s claim to be the first pursuer’s sole creditor was clearly inconsistent with the existence of double distress, and the absence of its two per cent administration fee from the fund was a clear indicator that its claim could not be well wounded.

The fifteenth defender adopted the submissions of the sixth and seventh defenders and further submitted that it had not received a December 2016 email introducing the new invoicing arrangements and thus did not accept the factual basis on which the first defender argued that a sub-contract existed between them.

Sufficiently material pleadings

In his opinion, Lord Armstrong accepted that the contract between the first pursuer and first defender could not determine the ranking of the remaining defenders on its own. However, he went on to say: “I heard detailed criticism of the relevancy of the first defender’s averments. Significantly, none of the sixth, seventh, or fifteenth defenders has a preliminary plea directed to such argument, but, in any event, I am satisfied both that dismissal of the first defender’s claim, and that decree de plano in the case of each of the sixth, seventh, and fifteenth defenders is not warranted.”

On the relevance of the agreements between the first defender and the remaining defenders, he said: “I am satisfied that, as a matter of relevancy and specification, the pleadings of the first defender, in their essence, are of sufficient materiality to justify enquiry into the referable contractual positions of each of the parties in the context of the sums claimed, the inferences to be drawn from the manner of the actings of each of the parties, and the consequent effects on ranking amongst them.”

He continued: “In reaching that view, I attach weight to the fact that, although there may be questions of degree as to the scope and extent of the presumption against novation and delegation in such circumstances, in the context of this case, given the facts averred and the relative background context, these issues arise and, given the respective position of the parties, could be resolved only on the basis of findings in fact.”

For these reasons, the first defender’s plea to be recognised as the sole creditor of the first pursuer was dismissed, and a proof before answer was allowed.