Court Of Appeal Confirms Decision In Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (In Liquidation) [2018] - A Lesson In Practical Utility

In July 2018, the Technology and Construction Court (TCC) handed down judgment in a case of particular significance for the construction industry and insolvency practitioners taking appointments in the sector in the case of Primus Build Limited v Cannon Corporate Limited (unreported). The substance of the dispute related to the contractor's claim for payment allegedly due for work completed, and damages for loss of profits.

A few weeks later in August 2018, we reported on the significant judgment in Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (in liquidation) [2018] EWHC 2043 (TCC). As set out in our review of the judgment, the judgment confirms that a company in liquidation cannot refer a dispute to adjudication when that dispute includes (whether in whole or in part) determination of "any claim for further sums said to be due to the referring party from the responding party". As anticipated, the first instance judgment was appealed by the company in liquidation, Bresco.

On the face of it, it seemed that these two first instance judgments were somewhat contradictory and potentially gave rise to more questions than they answered and so it is little surprise that the two appeals in these cases were heard together by the Court of Appeal, albeit that the Cannon appeal settled two weeks after the hearing. The Court retained discretion to hand down judgment in the Cannon appeal and so due to the close links between the two cases, it took an unusual step and decided that the judgment would address both appeals.

The judgment has been much anticipated.

The Bresco Appeal

Bresco had sought to set aside the order of Fraser J dated 31 July 2018, whereby he granted an injunction preventing the continuation of an adjudication in which Bresco sought declarations and sums said to be due from Lonsdale, by way of payment for works completed prior to leaving the site and/or damages for loss of profits.

The Court of Appeal dismissed Bresco's claim in the conjoined appeals. The Bresco appeal looked at two key issues:

whether an adjudicator can have jurisdiction to deal with a company in insolvent liquidation; and assuming the answer to 1 is yes, whether (i) such an adjudication could ever have any "utility" and, if not, whether (ii) an injunction preventing the continuation of the adjudication process was "justified in any event". The Jurisdiction Issue

In the TCC, Lonsdale argued that Bresco's right to adjudicate pursuant to s108 of...