How can we help?


Liquidation and adjudication

Adjudication is a relatively quick and cheap way of determining a construction claim. It is temporarily binding, meaning that with limited exceptions, it will be enforced by the courts unless and until it is overturned in subsequent litigation.  

A Liquidator will often have insufficient assets to fund litigation to pursue claims, especially if ordered to provide security for costs.  Faced with this problem, the Liquidator of Bresco Electrical Services Limited started an adjudication against M J Lonsdale.  Bresco had already been in liquidation for three years by the time of the adjudication and Lonsdale had lodged its own claim against Bresco.  Lonsdale successfully obtained an injunction to restrain the Liquidator from pursuing the adjudication.  Bresco appealed.

Lord Justice Coulson in the Court of Appeal considered the two grounds on which the injunction had been granted:

  • The effect of the mandatory rules of insolvency set-off deprived the Adjudicator of jurisdiction to decide the claim
  • The adjudication would be an ‘exercise in futility’ because the court would never order enforcement of the Adjudicator’s award

Having considered the issues in length, the Court decided that the Adjudicator did have jurisdiction.  The set-off rules do not prevent a company in liquidation from bringing litigation or arbitration and there was no reason why adjudication should be treated differently.  However, it remained the case that the adjudication would be pointless.  The existence of Lonsdale’s cross claim would prevent the court ordering summary judgment to enforce the Adjudicator’s award.  Even if that were not the case, the fact of the liquidation meant that the court would order a stay against enforcement.  Coulson LJ explained that there were a number of policy reasons for preventing pointless adjudications, including the need to avoid unnecessary costs for all parties and to protect the resources of the court for other litigants.

As the appeal was partially successful, the decision leaves open the possibility of Liquidators bringing an adjudication that would not be an exercise in futility.  One example might be a claim for a non-monetary award.

Adjudication is a relatively quick and cheap way of determining a construction claim. It is temporarily binding, meaning that with limited exceptions, it will be enforced by the courts unless and until it is overturned in subsequent litigation.  

At the same time, the Court heard the appeal in Cannon Corporate v Primus Build, which concerned a company in CVA.  The Court confirmed that the CVA did not deprive an adjudicator of jurisdiction.  In contrast to Lonsdale, the adjudication was allowed to proceed.  Primus was not in liquidation and, if the CVA succeeded, would never enter liquidation.  Accordingly, it was likely that the adjudication award would be capable of enforcement.  On the facts of the claim, Cannon was the cause of Primus’ financial difficulties, meaning that the Court was unlikely to order a stay.

Whilst the two appeals give very helpful guidance, cases will still turn on their own facts.  Before commencing an adjudication, a company in any form of insolvency process must ask the question – is the court likely to enforce the adjudication award?

About this article

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

About this article

Read, listen and watch our latest insights

  • 28 February 2024
  • Commercial Real Estate

Hidden risks in serviced office agreements

This is usually a fully furnished and equipped office space that is managed by a facility management company and made available for short-term or long-term rentals to businesses, varying from one week to a year, or even longer.

  • 27 February 2024
  • Employment

Changing Attitudes to Menopause

We have set out some answers to the frequently asked questions that employers ask when considering how to support a menopausal employee.

  • 22 February 2024
  • Employment

Time to take the heat off menopausal women

On 22 February 2024, the EHRC released guidance and resources for employers designed to help employers understand their legal obligations in relation to supporting workers experiencing menopausal symptoms.

  • 22 February 2024
  • Employment

Talking Employment Law: What to do if you’re at risk of redundancy

In this podcast, Harry Berryman and Rebecca Dowle, members of the employment team, will talk through the steps that need to be taken for a redundancy to be fair and the range of criteria that can be used when determining which employees will be made redundant.

  • 21 February 2024
  • Immigration

FAQs Partner Visa UK

Discover the UK Spouse Visa: eligibility, finances, relationship criteria, and the latest updates in 2024 for a successful application.

  • 19 February 2024
  • Privacy and Data Protection

The role of Data Protection Officers in ensuring compliance

How many of us receive marketing calls for products and services we did not sign up for?