Adjudication, Liquidation And The Supreme Court

• Published date: 01 March 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Contracts and Commercial Law, Trials & Appeals & Compensation
• Law Firm: Blaser Mills
• Author: Ms Jackie Ray

Blaser Mills Law has been successful in a landmark appeal to the Supreme Court, which has clarified the law with regard to the ability to refer matters to Adjudication irrespective of the solvency of the parties.

In June, we announced that Commercial Litigation Partner, Jackie Ray and Lawyer, Nina Bhatti were successful in all points of the Appeal to the Supreme Court on behalf of Bresco Electrical Services Ltd (in liquidation) against Michael J Lonsdale (Electrical) Ltd.

The decision unanimously upheld the right of companies in liquidation to commence Adjudication proceedings, reversing the Court of Appeal decision preventing a party in liquidation from bringing an adjudication. This decision is significant because many construction disputes are resolved by adjudication.

Background of the case

In 2014 Bresco and Lonsdale entered into a contract whereby Bresco agreed to perform sub-contract electrical work for Lonsdale. However, in December 2014, Bresco left the site without completing the work with both companies claiming the other had wrongfully terminated the contract.

In 2015 Bresco went into liquidation. Then in October 2017, Lonsdale made a claim against Bresco for wrongful termination of the contract and claimed the costs of completing the works. However, Bresco maintained that it was Lonsdale that had actually terminated the contract and therefore, Lonsdale owed them money. Bresco referred its claim to adjudication seeking payment for work done and damages for breach of contract. However, Lonsdale sought an Injunction to prevent the Adjudicator rendering its decision, stating that Adjudicator had no jurisdiction as Bresco was insolvent.

Bresco appealed the Order granting an Injunction to the Court of Appeal. The Court of Appeal stated that the only claim that could be enforced was a claim for the net balance arising out of an insolvency set-off. The set-off occurred automatically when Bresco entered Liquidation and that the Adjudicator did not have jurisdiction over the matter.

The decision

On appeal from the Court of Appeal, the Supreme Court confirmed that there was no absolute jurisdictional bar preventing an insolvent party commencing and pursuing an adjudication. Therefore, the cross-appeal by Lonsdale on jurisdiction failed and was dismissed.

The Supreme Court's decision allows all...