An engineering company that acted as a contractor in a project contracted with a subcontractor for specific works. The agreement between the subcontractor and the engineering company determined, inter alia, that the payments to the subcontractor is subject to receipt of payment by the engineering company (a "back to back" clause). The subcontractor didn’t receive the full payment and filed a claim.
The Court rejected a motion to dismiss the claim and repeated the case law that the purpose of a "back to back" clause between a contractor and a subcontractor is, normally, to prevent a situation where the contractor need pay the subcontractor for work that was not approved or paid for by the client due to grounds related to the subcontractor, such as partial or improper work. This, despite the existence of a "back to back" clause in the agreement between the parties and even if the contractor did not receive payment from the client it does not cancel the obligation of the contractor to pay the subcontractor if it is found that the subcontractor did properly conduct the work. Thus, the Court held that office holders of the client might be required to testify.