Adjudication is a legitimate tool for Liquidators to quickly establish if a construction debt is valid and for how much, and find the net balance between conflicting claims.

Bresco v Lonsdale [2020] UKSC 25 UK Supreme Court

Bresco v Lonsdale [2020] UKSC 25 UK Supreme Court

Facts

Bresco was the electrical subcontractor to Lonsdale, carrying out works at Saint James's Square London. Bresco ceased to perform its works and claimed £219,000, including damages for loss of profit. Lonsdale paid £325,000 to get the work carried out by others and cross-claimed for breach of contract. Bresco then went into liquidation and its liquidators claimed in adjudication . Lonsdale obtained an injunction to restrain the adjudication process.

Supreme Court Held

  1. The two claims did not cancel each other out, each was contested and should be determined on its own merits.
  2. Thus, an adjudication was not futile, nor did the fact of liquidation cause disputes to disappear, they must still be resolved.
  3. Therefore the injunction lifted, so the adjudication could go ahead.

Comment

  • Adjudication of construction disputes is generally understood to be about cash-flow.  Lonsdale convinced both the High Court and the Court of Appeal that as Bresco would probably not be granted summary enforcement of any adjudication Award, the process was futile and should be stopped. The SC perceived that there is another, equally important function.  Adjudication is a form of ADR in its own right, often leading to a “speedy, cost-effective and final resolution”.   In reality, most Awards are not challenged in the Courts, and therefore provide “a simple, proportionate method” of determining disputes.

 

  • Granting an injunction against adjudicating was also contrary to s108 of the Housing Grants Construction & Regeneration Act, 1996 which gives the right to construction contract parties to adjudicate “at any time”. The Supreme Court has robustly answered the question whether that right applies even during liquidation.

 

 

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