Company Voluntary Arrangements or CVA’s

Mead sought to enforce an adjudicator's decision of £332k. Dartmoor resisted on the basis that, as Mead was subject to a CVA, a stay should be granted on any judgment otherwise awarded to Mead. Mr Justice Coulson refused. There was no previous authority dealing with the point, but the Judge decided the following principles were relevant:  

  1. the fact that a claimant is the subject of a CVA will be a relevant factor for the Court to take into account when deciding whether or not to grant a stay of execution of the judgment;  
  1. however, the mere fact of the CVA will not of itself mean that the Court should automatically infer that the claimant would be unable to repay any sums paid out in accordance with the judgment, such that a stay of execution should be ordered;  
  1. The circumstances of both the CVA and the claimant’s current trading position will be relevant to any consideration of a stay of execution;  
  1. It is also relevant as to whether or not the claimant’s financial position and/or the CVA is due, either wholly or in significant part, to the defendant’s failure to pay the sums awarded by the adjudicator.  

In this case, Mead’s current financial position was that, despite the difficulties created by the non-payment of the adjudicator’s decision, Mead was continuing to trade successfully. There was clear and cogent evidence that Mead’s financial difficulties began when Dartmoor started to pay less than what was being claimed and in some instances made no payments at all. The Judge accepted Mead’s evidence that Dartmoor’s failure to pay was the principle reason for Mead’s financial difficulties.  

Further, the CVA’s supervisor provided evidence that he believed Mead could trade successfully out of their temporary difficulties. Therefore, there was no reason to believe that Mead would not be in a position to pay back any part of the judgment sum if, in a subsequent arbitration, the arbitrator concluded that they had been overpaid. As Mead’s financial difficulties had been caused and/or contributed substantially to, by Dartmoor, the court was not prepared to grant a stay of execution on the basis of those financial difficulties.