Bresco v Lonsdale

The Supreme Court Decision in Bresco v Lonsdale [2020] – When can insolvent companies adjudicate?

Facts

Bresco agreed to perform electrical works for Lonsdale in 2014. Bresco is now insolvent and Lonsdale claims it is owed over £300,000 compensation by Bresco. Bresco says it is owed money for work done. Bresco’s liquidator referred the dispute to adjudication but Lonsdale say adjudication is not available in these circumstances.

The Supreme Court has held that not only is there jurisdiction for an insolvent company to refer a dispute to adjudication but that:

  • the court should only restrain the exercise of that statutory and contractual right in ‘very exceptional’ circumstances; and
  • the reference of a construction dispute to adjudication will (notwithstanding that the adjudicator’s decision has only temporary finality) often prove useful to the liquidator.

This decision will have wide ranging consequences for the administration of construction insolvencies providing insolvency practitioners with a much greater ability to resolve disputed claims through adjudication and realise greater value for creditors. With the industry anticipating an increase in insolvencies in the wake of the COVID-19 pandemic, the clarity brought by this decision could not be better timed and is certainly a welcomed decision especially since construction companies are normally one the first to suffer during a recession. 

Link to full case: https://www.bailii.org/ew/cases/EWCA/Civ/2019/27.html