Has there been something of a softening on whether an insolvent company can ever refer a dispute to adjudication if cross claims exists?
Last year, the Court of Appeal in Bresco v Michael Lonsdale opened what looked to be a closed door for liquidators by holding an adjudicator can have jurisdiction in such circumstances, although in all but exceptional cases it would be pointless because any award could not be enforced.
In the case of Meadowside, the Court set out what those exceptional circumstances would be
- the adjudication being able to determine the final net position;
- the insolvent company providing satisfactory security for any sum awarded and for the costs of any subsequent litigation; and
- any funding arrangements not amounting to an abuse of process.
See Alison Garrett's blog 'A liquidator can adjudicate but only in very limited circumstances'
We now have a reported decision of a case fitting this criteria. In Balfour Beatty Civil Engineering v Astec Projects (in liquidation), Astec was permitted to proceed with three separate adjudications, each under different contracts, where it claimed it was owed £4,000,000 for work done and not paid for and loss and expense. Balfour Beatty was advancing the position that it was owed £1,000,000. It was accepted by both parties there were no other claims or counterclaims lurking anywhere other than in these three contracts.
As the three adjudications taken together were capable of determining what the net position was between Balfour Beatty and Astec, the final net position could be satisfied and the same adjudicator would be required to determine all three. Astec had already undertaken to ring-fence any recovery made pending any subsequent litigation and it had some After the Event (ATE) Insurance up to the value of £250,000.
So Astec was allowed to proceed but subject to conditions –
- there would be an immediate stay on enforcement for 6 months; and
- Astec would provide satisfactory security for the costs of any substantive litigation which might follow of at least £750,000.
For some time, the Courts have indicated an appropriately worded ATE Insurance policy can stand as good security and subject to some amendments to the policy wording which the Court required here, the policy was sufficient. Whether this is the long term position is still up for debate - the Supreme Court heard arguments on an appeal to the Bresco decision earlier this month and that will revisit the question of whether the adjudicator can have any jurisdiction at all. A decision will be expected on that later in the year so watch this space.