Court of Appeal considers interplay of insolvency and adjudication regimes (Bresco v Lonsdale)

Court of Appeal considers interplay of insolvency and adjudication regimes (Bresco v Lonsdale)

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The Court of Appeal considered that while an insolvent company in liquidation can, in theory, commence an adjudication, it was appropriate to grant an injunction restraining continuation of the adjudication. This is because the adjudication would be ‘an exercise in futility’—it will only be in exceptional circumstances that a company in insolvent liquidation (and facing a potential cross-claim) could obtain summary judgment to enforce an adjudication without a stay of execution being ordered. Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd; Cannon Corporate Ltd v Primus Build Ltd [2019] EWCA Civ 27

First published on LexisPSL Construction.

What are the practical implications of this case?

Practitioners should take this case as clear guidance that a company in liquidation is unlikely to be permitted to adjudicate against a respondent that has a potential cross-claim. Although injunctions are rarely granted where an adjudication is on foot, one can be ordered to prevent commencement/continuation of an adjudication where progressing with the adjudication would be pointless (and a waste of time and costs). This futility arises from the fact that enforcement of an adjudication decision in favour of a company in insolvent liquidation (without a stay of execution being ordered) will only be granted in an exceptional case.
 

What was the background?

The TCC had granted an injunction preventing the continuation of an adjudication in which Bresco (which was in insolvent liquidation) sought declarations and sums said to be due and payable by Lonsdale. This was on the basis that:
 
  • an adjudicator does not have the necessary jurisdiction to deal with a claim advanced by a company in insolvent liquidation (

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