A recent Supreme Court case in the UK has held that insolvent companies can proceed in construction adjudications. Prior to this, many companies would not proceed to adjudication.
The case of Bresco Electrical Services v. Michael Lundsdale 2020 UK SC 25 (17 June 2020) arose when the liquidator of Bresco Electrical Services referred a dispute to adjudication and Michael Lundsdale sought an injunction to restrain Bresco from pursuing the adjudication and had a cross claim against it for over £300,000.
The Supreme Court found that an insolvent company with a set off claim against it can make a claim in adjudication and that because it was insolvent does not mean that it cannot proceed to make a claim in adjudication.
The Supreme Court held that while in some cases an adjudication award may not be enforceable, this was not the position in many cases and that adjudication could proceed and that an adjudicator does have jurisdiction to deal with such an adjudication. It found that adjudication was a statutory and contractual right and that nothing in the statutory schemes in insolvency takes that away.
This case has important consequences, particularly for construction companies who are impacted financially, as it allows for insolvent companies to avail of construction adjudication and creditors will be able to benefit from the ability of insolvent companies to adjudicate such disputes.
12 October 2021