Comment The conclusion though seemingly sound raises a problem and potential pitfall for referring parties. If the claim is for the notified sum due on application absent a payment or pay less notice, an alternative claim for a valuation and payment would be a separate dispute and could not be referred in the same adjudication notice. 5. Jurisdiction—insolvency— company in liquidation cannot commence adjudication claiming further sums are due Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (In Liquidation) 12 This was a claim by Michael J Lonsdale (Electrical) Ltd (“Lonsdale”) for declarations and a permanent injunction to prevent Bresco Electrical Services Ltd (In Liquidation) (“Bresco”) from bringing a claim to adjudication, on the basis that Bresco’s liquidation operated in law to extinguish the claim(s) Bresco relied upon in that adjudication. Bresco agreed to perform electrical installation works for Lonsdale under a construction contract governed by the Act. Bresco left the site in December 2014 in controversial circumstances, with each party alleging wrongful termination by the other. Bresco commenced adjudication proceedings arguably seeking to refer at least four disputes for determination. They were: • Whether Lonsdale committed a repudiatory breach of contract; • Whether Bresco completed works to a particular value prior to the repudiatory breach; • Whether Bresco was entitled to be paid for work it had completed, and what amount it had in fact been paid; • And also whether Bresco was entitled to damages for loss of profits (and potentially, how much those damages were). However, both parties maintained before the Court that the notice referred a single dispute to adjudication and given the nature of the issues that arose for resolution, the Court was prepared to proceed on that basis. At least three of the decisions sought from the adjudicator concerned what sums of money were due to Bresco. Therefore the dispute (if there was only one), sought a decision from the adjudicator that particular sums were due to Bresco from Lonsdale, by way of payment under the contract and/or damages for loss of profit. Despite a challenge by Bresco, the Court had no doubt it had the necessary jurisdiction to grant an injunction in an ongoing adjudication 13 .
The question for the Court was whether a company in liquidation could refer a dispute to adjudication when that dispute included (whether in whole or in part) determination of a claim for further sums said to be due to the referring party from the responding party? The answer required a detailed review of the relevant authorities, the statutory adjudication regime, the Insolvency (England and Wales) Rules 2016 (SI 2016/1024) and the Insolvency Rules 1986 (SI 1986/1925) following which the Court concluded as follows: 1. There were some minor differences in the wording between Rule 4.90 of the 1986 Insolvency Rules and Rule 14.25 of the 2016 Insolvency Rules. Both rules required the taking of an account of what was due from each party to the other in respect of their mutual dealings and then setting off of sums due from one party against the sums due from the other. 2. The minor differences in the wording did not make any difference to the issue before the Court. Even if they did, the use of the expression in the 2016 Rules “an account must be taken” made clear that the provisions were mandatory. That “account” included, and consisted of, analysis of the parties’ “mutual dealings” with set off of the different sums due in each direction to arrive at a single balance. 3. The sums claimed to be due from Lonsdale to Bresco, and sums claimed from Bresco to be due to Lonsdale, clearly fell within the definition of “mutual dealings” and were caught by the Rules. There were plainly mutual credits and/or mutual debts between the company in liquidation (Bresco) and the creditor (Lonsdale) and an account had be taken of those dealings in each direction to arrive at a single balance due either to, or from, the company in liquidation. Such categorisation of those sums included the sums the subject matter of the dispute referred to adjudication in this case. 4. As at the date of the liquidation, and as a direct result of what occurred upon the appointment of the liquidator and the operation of the Insolvency Rules, the disputes between Lonsdale and Bresco that consisted of claims and cross-claims between them were to be replaced with a single debt. Thereafter the resolution of the dispute required the taking of an account to determine the balance payable and in which direction. 5. All Bresco could have was a claim to the balance following the taking of the account required by the Rules. An adjudicator could not conduct such an account under the Insolvency Rules. 6. It was clear from previous authority that once a contractor became insolvent, there was an automatic set off arrangement 14 . “Accordingly, the importance given by the legislature to cash flow for contractors and subcontractors in sections 109 to 111 of the Act effectively gave way to the importance of rights of creditors once there is an insolvency” 15 .
4
Made with FlippingBook - Online catalogs