It wasn't so long ago that retention of title (RoT) clauses took somewhat of a backseat. Afterall, deciding who owned what on a construction site given the number of parties involved in any one project was not an easy task. However, given current market conditions and the increase of buyer insolvency, many suppliers are turning their attention back to the clause in an attempt to claw back their goods.

In 2009, almost 3000 construction firms entered into some form of insolvency procedure, leaving many parties owed money by insolvent firms. These debts could be pursued against the third party's insurer under the Third Parties (Rights) Against Insurers Act 1930. However, debt recovery will be made quicker, cheaper and easier once the Third Parties (Rights) Against Insurers Act 2010 is commenced by Parliament.

Armed with an adjudicator’s decision and a TCC enforcement judgment, can a party issue a statutory demand for payment, even if the other party has a genuine and substantial cross claim against the sum awarded? No, said Judge Stephen Davies in Shaw v MFP. Neither the Construction Act nor the Scheme was intended to displace the position under the Insolvency Rules, which give the court discretion to set aside a statutory demand if the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the debt in the statutory demand.

An adjudicator can only deal with one dispute under one contract. In Enterprise v McFadden the adjudicator could not therefore deal with a claim to a net balance arising out of mutual dealings on four separate subcontracts (one of which was not even a construction contract) under Rule 4.90 of the Insolvency Rules 1986. Tripartite adjudication is not possible so the adjudication could not cope with a cross claim which would have involved joining assignors.

In the current economic climate, security for payment is key. Although banks have started to lend money again, they remain cautious and those construction firms with weak balance sheets remain at risk of insolvency. This article discusses five pitfalls in the context of some relevant case-law and devices to protect against these.

In June 2007 we reported on the decision in Prudential Assurance Company Ltd v PRG Powerhouse Limited. Although the case has given rise to a great deal of debate, until now there has been no subsequent reported case in which the court has had to consider whether and how a company voluntary arrangement (CVA) might fairly effect a compromise of a landlord's claim against a guarantor of its tenant.

Last week the High Court of England and Wales revoked a company voluntary arrangement (CVA) promoted by retailer Miss Sixty in a damning judgment that called into question the conduct of the practitioners involved. The case of Mourant & Co Trustees Limited v Sixty UK Limited (in administration) [2010] could end so-called guarantee stripping – where the CVA purports to discharge guarantees given by a third party – and provide powerful ammunition to landlords seeking to negotiate future CVAs with tenant companies.

R (on the application of Global Knafaim Leasing Ltd and another) v. Civil Aviation Authority and another

Summary and implications

The Government is proposing to give struggling companies a protected moratorium against enforcement action, to help them to negotiate a restructuring deal with their creditors.

The moratorium would be available to all companies which are preparing a CVA or scheme of arrangement. At present, a moratorium is only available to small companies* who are proposing a CVA.

Re Johnson Machine and Tool Co 6

The company was the subject of a “pre-pack” administration, whereby it was placed into administration and its assets immediately transferred to a new company controlled by the directors and owners of the existing company.