Adjudication v liquidation – the latest saga

In its judgment in Bresco, the Court of Appeal held that liquidation did not deprive a liquidator of a right to refer a construction dispute to adjudication; but it would only be in exceptional circumstances that a company in insolvent liquidation facing a cross-claim could refer a claim to adjudication, succeed and avoid a stay of execution.

This decision concerned the ambit of possible exceptions to the above principles. The company in liquidation in this case had won an award at an uncontested adjudication and was seeking summary judgment from the court to enforce the award.

The court held that a case is likely to be an exception to the ordinary Bresco position where:the adjudication is in effect dealing with the entirety of the mutual dealings between the parties and satisfactory security has been provided by the company in liquidation both for any award and any adverse order for costs made against the company in liquidation.

The court found that there was no dispute that the adjudication in the present case was in effect dealing with the totality of mutual dealings between the parties, but refused summary judgment as the company in liquidation had refused to disclose the terms of a funding arrangement, which may not comply with the Damages Based Agreement Regulations 2013 and was champertous.

The court went on to hold that, if it was wrong about that, the costs security provided by the company in liquidation was insufficient such that the court would have in this alternative scenario ordered summary judgment but issued a stay of execution of that judgment.

Meadowside Building Developments Ltd (in liquidation) v 12-18 Hill Street Management Ltd

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