Earlier this year the Court of Appeal held that whilst a liquidator can commence an adjudication, if the company in liquidation faces a cross claim the decision of the adjudicator is not capable of enforcement. The court said that the adjudication would be an “exercise in futility” (Bresco Electrical Services Ltd (in Liquidation) v Michael J Lonsdale (Electrical) Ltd.
Now a case has come along which, at least in theory, is an example of an exception to that rule (Meadowside Building Developments Ltd (in Liquidation) v 12-18 Hill Street Management Company Ltd). The Technology and Construction Court has held that there is an exception where:
- the adjudication is brought to determine the final net position between the parties under the relevant contract; and
- satisfactory security is provided to cover a) any sums awarded and paid in the adjudication, which are then required to be repaid if the decision is overturned in litigation or arbitration; and b) any costs orders made against the company in liquidation either in respect of any unsuccessful application to enforce the adjudicator’s decision or in any subsequent litigation/arbitration where the paying party seeks to overturn the adjudicator’s decision.
How often a liquidator is going to be in a position to validly give such security is an interesting question. In Meadowside the funding arrangements were held to be champertous and an abuse of process and summary judgment was therefore not granted ... but that is another story.