Adjudication and insolvency: Compatible regimes

The Supreme Court in Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 has allowed an appeal from the decision of the Court of Appeal and held that the fact that the claimant company had entered into creditors’ voluntary liquidation did not have the effect of depriving the adjudicator, to whom the claimant had referred its dispute with the defendant, of jurisdiction to decide the dispute, nor did it render the adjudication an exercise in futility. The claimant had both a statutory and a contractual right to refer the dispute to adjudication and neither the fact of the claimant’s insolvency nor the existence of the defendant’s cross-claim, rendered the adjudication an exercise in futility. The Supreme Court affirmed in clear terms that construction adjudication, on the application of the liquidator, is not incompatible with the insolvency process. The likely effect of the decision of the Supreme Court will be to switch the focus of attention in cases involving insolvency to the attempt to enforce the decision of an adjudicator. In such cases the party ordered to make payment is likely to seek to rely on the insolvency of the party to whom it has been ordered to make payment in order to resist the grant of summary judgment to enforce the decision of the adjudicator or to seek a stay of execution.