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Company in liquidation cannot commence adjudication claiming further sums are due

Company in liquidation cannot commence adjudication claiming further sums are due

In Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd [2018] EWHC 2043 (TCC), Fraser J in the Technology and Construction Court (TCC) decided that the right to adjudicate does not trump the Insolvency Rules.

It is a significant ruling for the construction sector and insolvency practitioners. Fraser J in the TCC has held 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.”

The judge reviewed the relevant authorities, the statutory adjudication process, and, in particular, the Insolvency Rules 1986 and 2016 which trump the Construction Act 1996.

This is a significant judgment because liquidators very often refer disputes to adjudication to recover sums allegedly owed to an insolvent company and the courts do not often interfere with an on-going adjudication.

Fraser J’s judgment clarifies that this is not permitted in relation to “any claim for further sums said to be due to the referring party from the responding party”. This type of claim now cannot be referred to adjudication and an adjudicator faced with such a claim has no jurisdiction.

While the judgment is thorough and relies on a number of authorities, it will lead to debate about its scope and whether it will lead to courts more readily interfering with the course of an adjudication, together with the means by which referring parties might seek to circumvent it.

20 August 2018

Michael Janney has over 36 years’ experience of acting in major contentious construction and engineering cases in the UK and internationally. He acts for employers, developers, main contractors, specialist subcontractors, NHS Trusts, education establishments, care home companies and housing associations. Michael specialises in disputes relating to defective workmanship, negligent design, extensions of time, loss and expense, measurement and final account payments.

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