Valescure Property Limited (in liquidation) & Ors v Paul Andrew Czekalowski & Anor [2026] EWHC 1372 (Ch)
[2026] EWHC 1372 (Ch)Case No CR-2025-001965
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Venue Rolls Building Royal Courts of Justice, 7 Rolls Buildings London EC4A 1NLDate 9 June 2026
Before
INSOLVENCY AND COMPANIES COURT JUDGE GREENWOOD
Between
(1) VALESCURE PROPERTY LIMITED (In Liquidation)Applicants(2) MARK GRAHAME TAILBY AND CRAIG ANDREW RIDGLEYApplicant(1) PAUL ANDREW CZEKALOWSKIRespondents(2) MARCUS JOSEPH HAWLEYRespondent
IN THE MATTER OF VALESCURE PROPERTY LIMITED (In Liquidation)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Ms Ella Vacani (instructed by Spencer West LLP) for ApplicantsMr Ryan Hocking for Respondents (instructed by Mills & Reeve LLP for the First Respondent, and by Neil Davies and Partners, for the Second Respondent)Hearing Hearing dates: 6 March 2026 (and following the Applicants’ Notice of Discontinuance dated 10 March 2026, further submissions in writing between 13 March and 25 March 2026)JUDGMENT
ICC JUDGE GREENWOOD:
[1]By an application dated 20 March 2025, and brought under section 212 of the Insolvency Act 1986 (“the Substantive Application”), Ms Emily Ball, in her capacity at that time as the sole liquidator of Valescure Property Limited (“the Company”) sought compensation from the Respondents (the Company’s former directors), Mr Paul Czekalowski and Mr Marcus Hawley (“the Respondents”), in the sum of about £13.5 million, based on allegations concerning the Company’s dealings with Shaylor Group Limited (“Shaylor”), which is in liquidation (following administration). Since making the Substantive Application, Ms Ball (who is no longer an insolvency practitioner) has been replaced as the Company’s liquidator (and thus as the Applicant) by Mr Mark Tailby and Mr Andrew Ridgley (and I will refer to the Company’s liquidators from time to time, as “the Liquidators”).[2]On 6 June 2025, the Respondents applied for reverse summary judgment, alternatively for the Substantive Application to be struck out (“the Dismissal Application”). On 25 July 2025, the Applicants applied for summary judgment against the Respondents in the sum of £1.2 million (“the Partial Summary Judgment Application”). The Respondents’ evidence was contained in two statements made by Mr Czekalowski and two by Mr Hawley.[3]The Dismissal Application and the Partial Summary Judgment Application were both listed for final determination before me on Friday 6 March 2026. Following that hearing (at the end of which I reserved judgment), on Tuesday 10 March 2026, the Applicants filed and served a Notice of Discontinuance in respect of the whole of their Substantive Application, having apparently come to accept that their case was “unlikely to succeed”. Subsequently, in their further submissions in writing, and in correspondence:(i) the Applicants agreed to pay the Respondents’ costs on the indemnity basis (albeit subject to a detailed assessment), and(ii) a (third party) company called Pythagoras Capital Limited (“Pythagoras”), which specialises in pursuing construction debts owed to insolvent companies, agreed in due course to satisfy the Applicants’ assessed liability.[4]Pythagoras and its founder Mr Gregory McMahon (who is also a director), were very closely involved in advancing the Substantive Application: in respect of the Dismissal Application and the Partial Summary Judgment Application, the Applicants relied (exclusively) on two witness statements made by Mr McMahon; in addition, Pythagoras and Mr McMahon have acted for Shaylor and its administrators/liquidators; in further addition, Mr McMahon is the founder of Circle Law LLP, which also acted for both Shaylor and its administrators, and (for some time at least, until they were replaced by Spencer West LLP) for the Company and the Liquidators.[5]In the circumstances, there is now very little outstanding between the parties. Moreover, the points that remain all concern costs, as follows: 5.1. the date from which interest on costs should be awarded under CPR 44.2(6)(g); 5.2. whether costs should be assessed summarily or there should be a detailed assessment, and if there is to be a detailed assessment, whether there should be a payment on account; 5.3. whether (were an application at some point to be made, as has been threatened) there might be an order for payment of the Respondents’ costs by a non-party (whether Pythagoras or any other person); and, 5.4. whether the Applicants’ own costs ought to be payable as an expense of the liquidation (if that is what they seek, in due course).[6]Nonetheless, the Respondents wish for a fully reasoned judgment on the merits of the various Applications; the Applicants resist that request. This is my judgment concerning that comparatively narrow issue (based on written submissions made since the hearing). The Background[7]The Company and Shaylor both carried on business in the field of construction. On the terms of a JCT contract made on 16 November 2017, the Company employed Shaylor in the construction of 157 apartments in Birmingham (“the Contract”); the total contract price, including variations, was £20,277,563.57. Separately, the Company entered into a “Development Agreement” on 22 November 2017 with other companies, known collectively as “Grainger”, which identified Grainger as the intended beneficiary of the Contract.[8]Well before the works had been completed, on 17 June 2019, on an appointment made out of court by its own directors, Shaylor went into administration. It was insolvent, and the estimated distribution to its unsecured creditors was about 0.39 pence in the pound. It had, by that time, been paid £9,013,019 by the Company.[9]Under the Contract, at that point, the Company had a choice: either it could have chosen to complete the works and employ other persons to that end (Clause 8.7: the “Completion Clause”), or it could have elected not to complete the works (Clause 8.8: the “Non-Completion Clause”).[10]Essentially, the Completion Clause provided for there to be an account of sums paid and expenses incurred by the Company following completion; were that aggregate amount to exceed that which “would have been payable” to Shaylor under the Contract, then Shaylor would owe the difference to the Company as a debt; if it were to be less, then the Company would owe the difference to Shaylor. The adjustment was therefore based on contractual expectations.[11]Alternatively, the Non-Completion Clause provided for there to be an account of the value of the work done as at the date of termination, insofar as not by then paid for; were that amount to exceed expenses incurred by the Company, and loss and damage suffered, then the Company would owe Shaylor the difference as a debt; were it to be less, then Shaylor would owe the difference to the Company. In this context, the adjustment would be based on the value in fact provided (to the Company) by the uncompleted work compared with sums paid (and losses suffered) by the Company.[12]In the event, the Company took the course of completion. Although ultimately unable to complete the works itself, it entered into an assignment with Grainger in about April 2020.[13]In those circumstances, from about June/July 2022, Shaylor and its administrators sought to rely on the Completion Clause to assert a claim against the Company under Clause 8.7.[14]Thus, under cover of a letter dated 8 July 2022, Shaylor sent a Notice of Intention to Refer a Dispute to Adjudication (signed by Mr McMahon) to Mr Czekalowski. The adjudicator rendered his decision on 8 August 2022 (“the First Adjudication”); insofar as relevant, he found that the Company (which did not participate in the adjudication) had acted in breach of the Completion Clause in not preparing a statement of account.[15]Shaylor then commenced a second adjudication against the Company (“the Second Adjudication”). On 29 September 2022, the second adjudicator decided that the sum of £356,008 was due to Shaylor from the Company. Essentially, the adjudicator found:(i) that the Company’s properly incurred expenses were £nil for the purposes of the Completion Clause,(ii) that Shaylor had been paid the sum of £9,013,929,(iii) that the value of the works completed by Shaylor for the purposes of the Completion Clause was £9,369,927, such that(iv) the Company was indebted to Shaylor in the sum of the difference, £356,008.[16]Based on the outcome of the Second Adjudication, Shaylor presented a winding-up petition against the Company on 4 November 2022, and a winding-up order was made by ICCJ Prentis on 21 December 2022. The petition was not opposed.[17]Shaylor then sought to challenge the outcome of the Second Adjudication by means of Part 8 proceedings against the Company. In particular, it argued that under Clause 8.7 of the Contract, “the total amount which would have been payable for the Works in accordance with this Contract” was £20,277,563.57, and not, as found by the second adjudicator, £9,369,927. On that basis, it submitted that its claim against the Company should be £11,264,544.57, rather than £356,008.[18]On 4 April 2024 (the Company not having been represented before him) Kerr J gave judgment (at [2024] EWHC 750 (TCC)). Amongst other things, he held that Shaylor’s suggested interpretation of the Contract was correct (in that “the total amount which would have been payable for the Works in accordance with this Contract” was indeed £20,277,563.57) but he nonetheless refused to make a declaration to the effect that the Company owed £11,264,544.57. Essentially, that was because he held that the suggestion that expenses incurred “by the Employer” included expenses incurred by Grainger (as the Company’s assignee, in the completion of the works) and thus fell to be taken into account for the purposes of the Completion Clause, was “not obviously untenable”, and that to give the Contract that meaning and effect would prevent Shaylor from recovering or claiming a sum “in the region of £10 million for notional work which it had not done and would never do”, and would therefore, “to state the obvious …. avoid[s] the windfall which is the cause of the injustice” from which (he inferred) the second adjudicator had “instinctively recoiled”. He set out at [78]-[84], his reasons for that conclusion about the effect of the Contract, which were, in very short summary (and insofar as now relevant):(i) that it did no violence to the language of the clause;(ii) that it preserved the integrity and commercial logic of the accounting exercise, and protected the Company against an unjust and punitive liability to pay for work the benefit of which it would not receive; and(iii) as stated above, that it avoided an unjust windfall in favour of Shaylor.[19]In substance, in order to succeed on their Substantive Application, the Applicants would have had to persuade a court that Kerr J’s view - powerfully expressed - was nonetheless wrong (or at least, that the interpretation of the Contract which he found sufficiently persuasive to decline declaratory relief, was wrong).[20]In the event, Shaylor then served a further Notice of Intention to Refer a Dispute to Adjudication under cover of letter dated 12 April 2024; the adjudicator in that adjudication (“the Third Adjudication”) gave his decision on 26 May 2024. Amongst other things, he found (essentially, on the basis explained by Kerr J) that the costs and expense incurred by Grainger were indeed to be included within the relevant calculation (as expenses “properly incurred by the Employer”), and that although he did not have sufficient material to produce the correct calculation, the relevant aggregate expenses were “probably … greater than would have been payable to Shaylor”, meaning that at least probably, nothing was due to Shaylor.[21]The Substantive Application was issued subsequently, on 20 March 2025. The core allegation was that the Respondents ought to have utilised the provisions of the Non-Completion Clause (under which the Company would have owed Shaylor about £350,000, on the Applicants’ case) and that in breach of duty, their decision instead to pursue completion (and thus to allow Shaylor to rely on the Completion Clause) had unnecessarily resulted in a debt owed by the Company to Shaylor in the sum of £11,264,544.57. It was in respect of that sum that compensation was therefore sought (despite the difficulty, immediately apparent, that the third adjudicator, on the basis of Kerr J’s judgment, had decided that Shaylor was probably owed nothing at all under the Completion Clause).[22]Against that background, the Dismissal and Partial Summary Judgment Applications were made. In brief, the Respondents’ case included:(i) that the adjudication process and the Part 8 proceedings did not in fact determine that Shaylor was owed £11,264,544.57 by the Company, which had not therefore suffered the alleged loss;(ii) that in any event, even in principle, the adjudication process was not such as to finally determine the dispute (by reference to section 108 of the Housing Grants, Construction and Regeneration Act 1996);(iii) that the decision to pursue completion was not in breach of duty: the issue was one of commercial judgment and complexity; and(iv) the Application was abusive, including because its purpose was to pursue a windfall for the benefit of Shaylor (and possibly Pythagoras and/or Circle Law and/or Spencer West) and that in light of Kerr J’s judgment, and his views about the meaning of the Contract, it was “difficult to see how the Liquidators [could] avoid the perception that they are not acting independently”. The Relevant Law[23]Essentially, in their written submissions, the parties agreed that despite the consensual settlement of proceedings, or their unilateral discontinuance, the court retains a power nonetheless to hand down judgment: see for example, Bank of England v Three Rivers DC [2006] EWHC 816 (Comm); Beriwala v Woodstone Properties (Birmingham) Ltd [2021] EWHC 609 (Ch) and Jabbar v Aviva Insurance UK Ltd & Others [2022] EWHC 912 (QB). In deciding how to exercise its discretion, the court will take account of all relevant circumstances; it will weigh any matters of public interest, and it will consider the private interests of the parties (see Beriwala at [18], per Robin Vos sitting as a Judge of the Chancery Division). The Present Case[24]In all the circumstances of the present case, I have decided not to deliver a judgment on the merits of the parties’ Applications. 24.1. As I have said, there is now very little outstanding between the parties (even less so since the Applicants’ offer to pay costs on the indemnity basis, which was made in the course of written submissions and correspondence following discontinuance) and all of that which remains to be decided (all concerning costs) can be dealt with appropriately and specifically, at a further hearing (or hearings), as would ordinarily be the case (in the absence of agreement, and of course without the benefit of a judgment) following a claimant’s discontinuance. Generally, Claimants ought not to be discouraged from discontinuing in circumstances where they have come to think that their case will fail. 24.2. In the context of costs - including questions concerning payment of the Liquidators’ own costs as an expense of the Company’s liquidation, should they arise - the court can make any such decisions, and consider any such evidence and argument as may be relevant and necessary, without having first decided and given judgment in respect of the whole case; its findings can be directed specifically to that which remains in issue. 24.3. In that regard, the Respondents are free to make an application for a non-party costs order (as threatened), supported by evidence and on notice. Ex hypothesi, those parties have not yet had an opportunity to respond, formally, to any such threat; they have not served evidence, and they are not before the court; it would be inappropriate and unfair to pre-judge their position. 24.4. As a matter of substance, the case itself, whilst of obvious importance to the parties (particularly the Respondents, as private individuals) did not raise any points or matters of broader legal, policy or other significance (as for example, in Jabber, which concerned a previously undecided point of law); it concerned only the Respondents’ conduct as directors of a private company engaged in building and development, and their decision to complete the project rather than end it, and the financial consequences of that decision. 24.5. Moreover, the allegations made against the Respondents were of negligence, not dishonesty, deliberate wrongdoing or criminality, and the Applicants have conceded (and thus publicly acknowledged) that “thereality of the situation” was that they were “unlikely to succeed” – a concession with which I do not disagree, given the decision and reasoning of Kerr J, which I have explained above, and which was underlined by the Applicants’ agreement (underwritten by Pythagoras) to pay the Respondents’ costs on the indemnity basis (appropriate only in cases “outside the norm”). 24.6. By way of contrast, for example, in Three Rivers, BCCI’s liquidators had engaged in a prolonged campaign, waged over many years, to prove that the Bank of England had acted in a knowingly unlawful and dishonest manner, and had only discontinued their claims on day 256 of the trial. At [2006] EWHC 816, [2], Tomlinson J said, “Over the course of twelve years of litigation the Bank, through its officers, was accused by the liquidators of an immense catalogue of outrageous behaviour. In addition to acting deliberately contrary to their statutory obligations, in a manner which they knew would probably cause loss to depositors in BCCI SA, or recklessly, knowing that there was a serious risk of such consequences, officials of the Bank were also accused of dishonestly misleading a number of persons and institutions, including even Parliament itself.” In those plainly extraordinary circumstances, amongst other things, the judge considered that it would be an affront to justice and contrary to the public interest to allow the liquidators to stifle publication of the court’s findings (albeit that even then, he did not deal in his judgment with every aspect of the case, as he would have done had it continued to its natural end). 24.7. In the present case, at the time of discontinuance (on 10 March 2026) there was no draft judgment (even held privately, uncirculated). Accordingly, there were, as yet, no draft or provisional “findings” – there was no written record of my views or conclusions; not having written a judgment, it is impossible to know with precision, what my findings would have been, or how I would have chosen to express them. The Respondents’ request that a judgment be handed down assumes that there would have been a need to deal with every aspect, rather than simply to determine the Applications; there is a certain artificiality in producing a judgment on the merits (at the request of one party, perhaps keen to secure certain findings, beyond merely success) in circumstances where a case has been completely abandoned, and it would not be an obviously sensible use of the court’s limited resources to do so; as Lord Neuberger MR (as he then was) said in Prudential Assurance Co Ltd v McBains Cooper [2000] 1 WLR 2000 at [21], “It will also be relevant in most cases to consider how far the preparation of any judgment had got by the time of the request. In the absence of good reason to the contrary, it would be a highly questionable use of judicial time to prepare a judgment on an issue which was no longer live between the parties to the case. On the other hand, where the judgment is complete, it could be said (perhaps with rather less force) that it would be a retrospective waste of judicial time and effort if the judgment was not given.” Although there was a suggestion made by the Respondents that a judgment would somehow assist in the context of a proof lodged by Grainger in Shaylor’s liquidation and/or in connection with a dispute that “is or may be ongoing” between those parties, that prospect was only very vaguely outlined; it was not possible to attach any weight to it. 24.8. Moreover, were a judgment now to be produced, and were I to reach conclusions with which one or other party disagreed, it would open the possibility of an appeal (including in principle, by the successful Respondents) albeit in proceedings that have been discontinued, and in which there may be no relevant order. That is a most unattractive prospect. 24.9. Finally, the Respondents relied on the regulated status of the Liquidators, and of Mr McMahon and Mr Braathen, as well as that of Circle Law LLP, Spencer West LLP and Pythagoras, to suggest that there would be a public interest in setting out my views of their conduct, which was criticised by the Respondents. Whilst I understand this point, it was not enough to cause me to deliver judgment:(i) the Applicants’ case was about the Contract and the effects of the Respondents’ conduct – the conduct of the Liquidators and others was not in issue, and did not fall to be decided;(ii) whilst it might reasonably be asked how or for what reason the case came to be advanced in the circumstances that I have outlined, that was not in issue: the gist of the Respondents’ evidence in support of their case that the Substantive Application was an abuse of process was that the Applicants’ case was hopeless, and was designed to generate an “unjust windfall” in favour of Shaylor – but whether or not that was so (or was simply the result of the parties’ own agreements) depended on the interpretation of the Contract, not on the conduct of the Liquidators or Shaylor or their various advisors;(iii) the Applicants’ Points of Claim were drafted by counsel; Shaylor has been in administration and/or liquidation for some time; various solicitors and advisors have been involved; I cannot say what advice has been given, by whom or when, or what caused the parties to act as they did, and it would not be fair to speculate;(iv) moreover, the hearing was not a trial: there was no oral evidence or cross-examination, or therefore any broader examination of events or conduct beyond the contents of the witness statements; the court’s freedom to disregard or disbelieve written evidence in the absence of cross-examination is limited.[25]Ultimately, having considered and weighed all the relevant circumstances and the various public and private interests, in my view there is no compelling reason to produce and hand down a full judgment on the merits of the Applications; indeed, there is good reason not to do so. Any remaining issues of costs can be dealt with at a further hearing. Dated 9 June 2026