ZIGGURAT (CLAREMONT PLACE) LLP v HCC INTERNATIONAL INSURANCE COMPANY PLC

[2017] EWHC 3286 (TCC), Technology and Construction Court, Coulson J, 20 December 2017

Performance guarantee bond – Interpretation – Impact of insolvency of contractor – Whether it operated to trigger the defendant’s liability under the bond

The claimant employed County Contractors (UK) Ltd (hereafter 'County') to build blocks of studios for students in Newcastle. County's performance was the subject of a Performance Guarantee Bond which was provided by the defendant to the claimant. In February 2016 County stopped work on the site, apparently because of the financial difficulties it was then facing and it failed to respond to notices sent to it requiring it to remedy its defaults. On 8 April 2016 County became subject to a Company Voluntary Arrangement so that it was insolvent within the meaning of clause 8.1.1 of the contract with the claimant. The claimant then employed other contractors to complete the works. The cost of doing so amounted to £621,798.38 which the claimant sought to recover from County pursuant to a notice sent on 10 March 2017, which demanded that the sum be paid as a debt in accordance with clause 8.7.5 of the contract between the parties. On 17 March the claimant also made a claim under the bond against the defendant, although that claim was limited to £382,519.06, being the maximum liability under the bond. The defendant denied that it was liable to meet the claim on the bond, taking the point that the bond was a default bond, not a demand bond, so that it was necessary for the claimant to prove that a breach of contract had taken place and that losses had been incurred as a result of the breach.