1. Introduction The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 2 of 2019. Kenneth T. Salmon, Consultant Solicitor and Katy Ormston, Trainee Solicitor at Slater Heelis LLP. The law is stated at January 31 2019. This part cover only the recent decision of the Court of Appeal examining thetensionthatexistsbetweenadjudicationandtheinsolvency regime. This part is dedicated to a decision of the Court of Appeal on the inherent incompatibility between insolvency and adjudication. 2. Insolvency – Effect on Enforcement Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd; and Primus Build Ltd v Cannon Corporate Ltd 6 As reported in Part 1 Cases 2019, these two conjoined appeals were heard in the Court of Appeal who upheld in large measure both of the first instance rulings. In Lonsdale v Bresco , the Court held that the adjudicator did have jurisdiction to hear the dispute despite the fact that the referring party was a company in insolvent liquidation. However, to allow the adjudication to continue was neither just nor convenient. It would have been an exercise in futility, as the adjudicator was only asked to deal with one claim out of several and that would have prevented the taking of an account as required by the Insolvency Rules 2016. An injunction had been properly granted. In Primus v Cannon , the Court held that the mere fact that a company was in a Company Voluntary Arrangement (CVA) did not mean that summary judgment should be refused or a stay granted. Each case depended on its own facts. Here the purpose of the CVA was to enable the company to trade out of its difficulties and recovering the monies owed to it was a key part of that objective. It was also held that a “general reservation” to challenge jurisdiction would only be effective if it was made “appropriately and clearly” and that the proper course was to make a specific challenge on every ground which was or should have been apparent. Where there was a mix of specific and general reservations, the express inclusion of the former might undermine or negative the latter.
The rulings in more detail Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd; At first instance, Fraser J. had granted an injunction to restrain an adjudication by a company in insolvent liquidation. He did so on several grounds including that the adjudicator had no jurisdiction to hear the dispute because there was no sum due unless and until an account had been taken under the Insolvency Rules 2016. The Court of Appeal overruled Fraser J. on this point but upheld him and the grant of the injunction for other reasons. The appeal raised directly the question whether an adjudicator could ever have jurisdiction to deal with a claim by a company in insolvent liquidation. And if so whether such an adjudication could ever have any utility and if not whether an injunction preventing what would be an exercise in futility, was justified in any event. This involved consideration of the Insolvency Rules 2016 and previous case law and the purpose and utility of adjudication. The facts Bresco served an adjudication notice 3 years after its liquidation claiming that its subcontract had been repudiated and seeking payment for unpaid work and other sums amounting to £220,000 odd. Tony Bingham was appointed adjudicator. Lonsdale asked Mr Bingham to discontinue the adjudication on the basis that he had no jurisdiction because Bresco was insolvent and placed into insolvent liquidation. Mr Bingham made a non-binding ruling that he thought he had jurisdiction. Lonsdale issued Part 8 proceedings seeking an injunction to restrain the continuation of the adjudication. Fraser J granted the application for two reasons: first, on the authorities, the adjudicator did not have jurisdiction; second, it was “inconceivable” that any decision in favour of a company in insolvent liquidation would be enforced so that it would be neither just nor convenient to permit the adjudication to continue 7 (referred to in the judgment of the Court of Appeal as the “utility argument”).
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