Contracting with the right party

In the recent Technology and Construction Court case of MG Scaffolding v Palmloch [2019] EWHC 1787, the court had to consider just such a situation.

MGS provided a quote to "MCR Property Group" for the supply of scaffolding.  MCR Property Group, a trading name, responded with a purchase order, asking for invoices to be issued to "Palmloch Ltd".  Disputes arose, and in December 2018 MGS issued adjudication proceedings against MCR Property Group.  MCR responded that MCR Property Group was the trading name of MCR Management Limited, a company which shared its premises and trading name with Palmloch.

The adjudicator considered the jurisdictional issue and came to the conclusion that MCR Property Group and MCR Management Ltd were one and the same, and he proceeded with the adjudication.  MCR then reiterated that MCR Property Group was not a legal entity; it was just a trading name, and Palmloch Ltd was the contracting party.  The adjudicator accepted that the true contracting party was Palmloch Ltd, and that the party named in the notice of adjudication, MCR Property Group, could reasonably be construed to be the trading name for Palmloch Ltd.  The adjudicator proceeded to find for MGS.

MGS then instituted summary judgment proceedings against Palmloch to enforce the adjudicator's determination.  Palmloch contended that it had an arguable defence to enforcement of the determination - neither MCR Property Group nor MCR Management Ltd were parties to the contract, and therefore the adjudicator did not have jurisdiction.

The court accepted that the correct contracting parties were MGS and Palmloch, and that the adjudication was commenced against MCR Property Group, a trading name with no legal existence of its own.  The issue, therefore, was not over the identity of the contracting parties, but over whether or not the adjudication proceedings had been brought against the wrong party.  The use of the trading name by two separate companies, Palmloch Ltd and MCR Management Ltd, presumably in the same trading group, did not help matters.

Noting that there was no lack of clarity in the mind of the recipient of the notice that Palmloch was the respondent; the notice referred to the correct property and project; the other details in the notice put beyond doubt the property and project to which the notice related; and the property was owned by Palmloch, with no suggestion that any other entity in the MCR Property Group was even remotely involved; the court held that the notice had been validly issued and that there was no arguable defence to the summary judgment proceedings.

In reaching this conclusion, the court acknowledged that a critical factor was that there was no doubt in the recipient's mind that the notice related to Palmloch.  MCR Property Group was a trading name used by Palmloch, and it was clearly the intended receiving party.

While not encouraging laxity in recording the names of contracting parties, invoicing the correct contracting party and issuing proceedings against the right party, the case provides useful protection for those contracting with parties who are "opaque", if not elusive, about their corporate structures.