An Uphill Battle? Adjudication Enforcement By An Insolvent Company

• Published date: 25 September 2020
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Corporate and Company Law, Contracts and Commercial Law, Construction & Planning
• Law Firm: Charles Russell Speechlys LLP
• Author: Mr Andrew Keeley

Following the recent Supreme Court decision in Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd, it is clear that companies in liquidation have the right to adjudicate a dispute. However, a successful adjudication is only half the battle: the insolvent company must still persuade the court to enforce the decision.

In John Doyle Construction Ltd v Erith Contractors Ltd [2020] EWHC 2451 (TCC), the Technology and Construction Court (TCC) has recently given further guidance on the circumstances in which enforcement may be possible. In short, it still appears that enforcement will be an uphill battle for liquidators.

Background

This case concerned a final account dispute. The claimant, John Doyle Construction Ltd (JDC), was employed to carry out landscaping work at the Olympic Park by Erith Contractors Limited (Erith). The works were completed prior to the 2012 Games, under an amended NEC3 contract. JDC entered administration in June 2012 and then creditors' voluntary liquidation in June 2013.

The dispute was not adjudicated until June 2018, five years later. JDC's liquidators had been unable to agree the final account with Erith. The liquidators then purported to assign the debt to Henderson Jones, a company which specialises in purchasing claims from insolvent companies. Eventually the liquidators and Henderson Jones sought to enforce the adjudicator's decision using the expedited summary judgment procedure in the TCC.

Principles to be applied by the court

The judge (Fraser J) set out the following principles to be applied by the court when considering an application for summary judgment of an adjudicator's decision in favour of a company in liquidation:

1. Whether the dispute in respect of which the adjudicator has issued a decision is one in respect of the whole of the parties' financial dealings under the construction contract in question, or simply one element of it.

This principle is necessary because parties will often refer a small or tightly defined dispute for adjudication for tactical reasons. Adjudication decisions on narrow issues, such as 'smash and grab' disputes, will rarely be susceptible to enforcement on a summary basis by companies in liquidation.

2. Whether there are mutual dealings between the parties that are outside the construction contract under which the adjudicator has resolved the particular dispute.

3. Whether there are other defences available to the defendant that were not deployed in the...