Balfour Beatty Civil Engineering Ltd & Anr v Astec Projects Ltd (in liquidation)
[2020] EWHC 796 (TCC)
This was an application for an injunction to restrain three adjudications which Astec wanted to bring arising out of subcontracts with BB at Blackfriars Station, London. Astec went into administration in April 2014 and then liquidation in October 2014. Astec said that it was owed £4m; BB said that it had claims which would result in a net sum due of £1m. Nothing really happened after the liquidation, until 24 December 2019, when Astec’s solicitors sent a claim letter. This was followed by a first notice of adjudication on 24 January 2020. Astec had obtained funding from a legal funder, Pythagoras, which would be entitled to a significant (but not beyond 50%) fee from any recoveries ultimately made. Astec also had legal expenses and after the event insurance, and the insurer attended the court hearing.
BB said that the adjudications should not proceed because they fell outside of the “very limited number of cases” where the court will contemplate allowing adjudications where the claiming company was in liquidation. This followed Bresco v Lonsdale (see Issues 219 [1] and 214 [2]), which was argued before the Supreme Court on 22/23 April 2020. In Bresco, whilst Coulson LJ held that there was no absolute jurisdictional bar to holding an adjudication if the claimant was insolvent, he also held that in very many cases an adjudication in such circumstances would be pointless.
The Bresco case was discussed in detail in Meadowside v Hill Street (see Issue 223 [3]) where the Judge made it clear that an adjudication proceeding in these circumstances was going to be the exception rather than the rule. However, as a matter of public policy, a court should be slow to hinder the liquidator’s efforts to ascertain and recover debts in accordance with their statutory obligation, again provided that adequate security was given in respect of the decision amount and any potential adverse costs orders (including at enforcement and any subsequent action to bring about a final resolution of the dispute).
Mr Justice Waksman held that if there were three adjudications and each one produced a net result in favour of one or other of the parties, then by netting those results off against each other one would arrive at a complete and comprehensive account of the parties’ mutual dealings. However, the key question was whether to allow the adjudications to proceed. The Judge’s solution was, once the adjudication decisions had been given, to order an immediate stay on enforcement against Astec, provided that BB started litigation within six months. This was much simpler and easier than say Astec seeking to obtain the monies and paying them into court. The Judge did not accept the suggestion that the right course was litigation now rather than adjudication(s) because the adjudication would be too complicated (due to the three subcontracts). A court does not prevent adjudications because one party considers that they would be unduly complex.
Mr Justice Waksman considered that Astec should be allowed to bring those adjudications subject to certain conditions. Security for the costs was originally offered by Astec at £250k, but that was only in relation to one notice of adjudication and hence one contractual dispute. If there were three contractual disputes, logic suggested that the amount of security should be £750k. Astec disagreed, saying that this did not follow because you would not know how much cost would actually be incurred until the adjudications had taken place. The Judge disagreed. The initial security must be £750k. This was subject to the right of BB to seek further security if that sum had been or was likely to be expended. The Judge noted that he had seen a letter from insurers giving an indication that they would be prepared to increase the amount. However, the Judge was not prepared to leave that to chance and so made an order.
BB also objected to clause 3(c) of the insurance policy, which said that if there was any material deterioration in the prospects at trial for the insured (i.e. Astec) then insurers may terminate the policy, at which point the costs protection in favour of BB would stop. BB said that if it was pursuing a claim where it had to overturn an award in favour of Astec, even if Astec’s claim was struck out since security was no longer available, BB would still have to continue to trial to obtain a judgment in excess of the award. The Judge disagreed noting that any stay on enforcement of the adjudicator’s decisions in Astec’s favour would become permanent if Astec’s claims in the litigation came to a premature end. BB would not therefore be out of pocket and there would then be no commercial interest in BB continuing with the litigation unless it decided speculatively to continue and take its chances whether it could recover something from Astec.
Therefore, subject to the points above, Mr Justice Waksman did not see “any fatal jurisdictional objection to the adjudications proceeding or that any exercise of discretion must inevitably prevent them from occurring”.
See also commentary on the Supreme Court decision in Bresco in Issue 241 [4].
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