The claimant, Michael J Lonsdale, entered into a Sub-Contract in 2014 with the Defendant, Bresco Electrical Services, for electrical installation works.  Bresco left site in December 2014 and both Parties claimed wrongful termination against the other.  On 12 March 2015, the Defendant went into liquidation and this part 8 claim centred around whether a company in liquidation can refer a dispute to adjudication when that dispute includes determination of a claim for further sums said to be due to the referring party from the responding party.  

Fraser J, during his judgement, considered that sums due from Claimant to the Defendant and vice versa fell within the definition of ‘mutual dealings’ and therefore fell within Rule 14.25 C6 of the Insolvency (England and Wales) Rules 2016. 

The effect of the Insolvency Rules is that, where there have been previous dealings between the company falling into liquidation and a counterpart, an account needs to be taken in order to ascertain the amount which is owed from the liquidated company to the counterpart, or vice versa. When drawing reference to the case of Enterprise Managed Services Ltd v Tony McFadden Utilities Ltd [2009] EWHC 3222 (TCC),the court recognised that adjudicators do not have the power to resolve disputes in the taking of the account required by the Insolvency Rules.

In this case, the court held that, as the dispute referred to the adjudicator included both money claims and cross claims, and an analysis of how much was owed to Bresco, he did not have jurisdiction to determine the dispute referred to him. The only dispute that remains is the taking of the account under the 2016 Rules. Therefore, the adjudication was discontinued.  

The implication of this case is 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. This is because, following the appointment of a liquidator, all claims and cross-claims cease to be capable of separate enforcement. Instead, following an account taken in accordance with the Insolvency Rules, all disputes relate to the net balance and such a dispute cannot be the subject matter of an adjudication.