Bresco Electrical Services Ltd (In Liquidation) v Lonsdale (Electrical) Ltd
[2020] UKSC 25
We have previously written about the Bresco case in Issues 219 [1] and 224 [2]. On 17 June 2020, Lord Briggs gave judgment of the Supreme Court. This is an important judgment for a number of reasons. First, it is a significant endorsement by the Supreme Court of the value of adjudication. Lord Briggs noted the: “chorus of observations, from experienced TCC judges and textbook writers” to the effect that adjudication does, in most cases, achieve a resolution of the underlying dispute which becomes final. He also confirmed that adjudication has: “as was always intended, become a mainstream method of ADR, leading to the speedy, cost effective and final resolution of most of the many disputes that are referred to adjudication.”
These comments perhaps help to explain why the Supreme Court allowed the appeal by Bresco and decided that there is no incompatibility between the statutory adjudication and insolvency regimes. As a result of this judgment, liquidators both in this case and generally, will, subject to certain important qualifications, be able to pursue claims through adjudication. That said, whilst the Supreme Court held that adjudicators would have jurisdiction to consider disputes referred by insolvent companies, it also made clear that the TCC would continue to have discretion to consider whether or not to enforce the adjudicator’s decision. Lord Briggs was clearly reaffirming the current position that: “Where there remains a real risk that the summary enforcement of an adjudication will deprive the respondent of its right to have recourse to the company’s claim as security (pro tanto) for its cross-claim, then the court will be astute to refuse summary judgment.”
In adopting this view, the Supreme Court has taken a similar position to two recent judgments, Meadowside Building Developments Ltd v 12-18 Hill Street Management Co Ltd (Issue 233 [3]), and Balfour Beatty Civil Engineering Ltd v Astec Projects Ltd (Issue 239 [4]), where the TCC seemed to accept that adjudications brought by insolvent companies could potentially proceed subject to proper security being provided to the potential responding party. Astec obtained funding from a boutique investment fund, which focused on construction insolvencies and had legal expenses and after the event insurance. Even so, the court would only allow the adjudications to proceed if adequate security was given in respect of the decision amount and any potential adverse costs orders (including enforcement and any subsequent action to bring about a final resolution of the dispute). This may well be the future way forward, as Lord Briggs also noted that in many cases the liquidator might not seek to summarily enforce the decision or alternatively might offer appropriate undertakings in terms of costs or to ring-fence any enforcement proceeds.
In the short term, it is likely that the Supreme Court decision will lead to a revival of adjudications that may have been put on hold pending the judgment and will also no doubt lead to a number of claims being brought on behalf of companies in liquidation. The corollary will be that respondents to these adjudications may now seek security or similar undertakings from the liquidators. The Wimbledon v Vago principles too remain in place, which mean that adjudication decisions obtained by insolvent companies will still be vulnerable to applications for a stay. The key to how this plays out will be the approach taken by the TCC as the court inevitably faces a temporary increase in enforcement challenges in this type of adjudication. Something to watch out for.
Click to download PDF