Balfour Beatty Civil Engineering Ltd v Astec Projects Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Judge | Mr Justice Waksman |
| Judgment Date | 27 February 2020 |
| Neutral Citation | [2020] EWHC 796 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2020-000049 |
| Date | 27 February 2020 |
[2020] EWHC 796 (TCC)
Mr Justice Waksman
Case No: HT-2020-000049
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
The Rolls Building
7 Rolls Buildings
Fetter Lane
London
EC4A 1NL
Mr. Thomas Crangle (instructed by Pinsent Masons LLP) for the Claimants
Mr. Riaz Hussain, QC and Ms. Chantelle Staynings (instructed by Gateley Plc) for the Defendant
APPROVED JUDGMENT
Introduction
This is an application for an injunction, on Twintec or Twintec-analogous principles, to restrain three adjudications which the Defendant sub-contractor (“Astec”) seeks to bring, in respect of the three sub-contracts it had with the Claimant main contractor (“Balfour Beatty”). Balfour Beatty is the party seeking the injunction. There is no issue between the parties that the entirety of their dealings for all these purposes are constituted by these three separate sub-contracts. They all deal with various aspects of work to and around Blackfriars Station. The first contract is called “the North Contract” and in that regard a notice of adjudication has already been issued. The second is in respect of “the South Station” and the third is in respect of the “the Lighting Boom”.
Although the first adjudication notice has only been recently served, these works began as long ago as 2010. In April 2014, Astec went into administration and then liquidation in October 2014. By that point or shortly afterwards, both sides had claims or counterclaims against each other. Astec said that it was owed £4m in respect of work done and not paid for, loss and expense, and matters of that kind. Balfour Beatty, for its part, denied those claims and said that it was entitled to recoup some ex gratia payments or payments on account, further, that there were delays and defective work which sounded in damages, all of which would result in a net sum due to it of £1m. Both sides accept, for present purposes, that these are genuine claims and counterclaims; indeed they are the sort of matters that come before adjudicators very regularly.
Nothing happened after the liquidation, apart from one notice of funding from Astec's then-solicitors in 2016, until 24 th December 2019. That is when Gateley, now the solicitors for Astec, sent a claim letter. It was followed by a first notice of adjudication sent on 24 th January 2020. Astec by then and though in liquidation, had obtained funding from a legal funder called Pythagoras, which will be entitled to a significant (but not beyond 50%) fee from any recoveries that Astec may ultimately make. Astec also has in place legal expenses and after the event insurance and, indeed, its insurer is in court today.
Because this matter has come up so late, there have been a number of shifts of position as what Astec is prepared to offer by way of security to Balfour Beatty.
Balfour Beatty's Application
The whole question of the offer of security arises in the context of Balfour Beatty's application. As Astec is an insolvent company, Balfour Beatty says no adjudications should proceed. This is because, in essence, they fall outside what is now said to be the very limited number of cases where the court will contemplate allowing adjudications at all where the company seeking the money is in liquidation. All of that, of course, was covered in considerable detail by the Court of Appeal in Bresco v Lonsdale [2019] EWCA Civ. 27. (At the time of delivering this judgment the Supreme Court was due to hear an appeal in April.)
The Law
Summarising Bresco as much as I need to for present purposes, the Court of Appeal, by the lead judgment of Coulson LJ, concluded that there is no absolute jurisdictional bar to the holding of an adjudication at the instance of an insolvent adjudication claimant. To that extent Coulson LJ accepted that he was wrong to have so concluded in Enterprise v McFadden [2010] BLR 89. In Bresco itself he concluded that the judge below had been wrong to hold that there was no jurisdiction at all. The reason why it had been thought that there might not be any jurisdiction was because of what Coulson LJ said still existed as a “fundamental incompatibility” between the adjudication regime on the one hand, and the insolvency set-off regime on the other. The relevant part of the latter, for present purposes, is constituted by rule 14.25 of the Insolvency Rules 2016 (formerly rule 4.90 of the Insolvency Rules 19860. It states:
“1. This rule applies in a winding up where before the company goes into liquidation there have been mutual dealings between the company and a creditor who is claiming in the liquidation.
2. An account must be taken of what is due from the company and the creditor to each in respect of their mutual dealings and the sums due from one must be set off against the sums due from another.”
That incompatibility was reflected in the ultimate outcome in Bresco case because, while it was not said that the adjudicator would have no jurisdiction at all because of the insolvency, it was thought that in very many cases an adjudication would be futile or pointless. This is because it could never reach a position where the ultimate mutual account could be reached as a result of the adjudication. Additionally, there could be difficulties arising in so far as security would be required by the party resisting the adjudication in the event of underlying litigation taking place. So it would never be enforced.
All of this was in turn considered in great detail by Adam Constable QC, sitting as a judge of the High Court in Meadowside v 12–18 Hill Street Management [2019] EWHC 2651. He took the view, with Bresco, that for an adjudication to be able to proceed in these circumstances was going to be the exception rather than the rule. But then at paragraph 87 he said:
“…. A case is likely to be an exception to the ordinary position in circumstances where:
(1) the adjudication brought or to be brought determines the final net position between the parties under the relevant Contract. An adjudication, by definition, will not be able to determine the net position between parties with dealings on more than one contract. The extent to which the adjudication is not capable of dealing with the entirety of the mutual dealings between the parties (and as such will not mirror the Rule 14.25 process between the parties) is to be taken account of in all the circumstances when looking at the utility of the adjudication and the discretion to injunct, or, following adjudication to enforce.
(2) Satisfactory security is provided both:
(a) In respect of any sum awarded in the adjudication and successfully enforced, so that it is repayable should the responding party successfully overturn the decision in litigation or arbitration brought within a reasonable time of the date of enforcement;
(b) In respect of any adverse order for costs made against (or agreed by) the company in liquidation in favour of the responding party in respect of:
(i) Any unsuccessful application to enforce the adjudication decision;
(ii) The subsequent litigation/arbitration, in which the responding party is seeking to overturn the adjudication decision;
The extent to which any such costs order is ordered to be met from the security would be a matter for the Court, insofar as it was not agreed.
(3) What is satisfactory as security in form, duration and amount is a question on the facts in the ordinary way and may be provided incrementally (as it would be, for example, in any security for costs application). A combination of the following solutions might be appropriate:
(a) the liquidator undertaking to the court to ring-fence the sum enforced so t hat it is not available for distribution for the relevant duration;
(b) a third party providing a guarantee or a bond;
(c) ATE insurance…
(4) As discussed further below in Section E, any agreement to provide funding or security which permits the company in liquidation to avoid the ordinary consequences of Bresco cannot amount to an abuse of process.
I refer to the conditions set out in paragraph 87 (1) to (3) as “the Meadowside Conditions”.
Analysis
The “Three Adjudications” Point
One has then to attempt to apply what can properly be drawn from those statements of principle to the case before me, which was not the case before the Courts in Meadowside or Bresco indeed any case that I have been referred to, and which results purely from the position that an adjudicator must undertake a separate adjudication for each contract in question.
In the case of most insolvent companies, of course, it will be impossible for the requirements of paragraphs 87(1) and (2) of the judgment in Meadowside to be satisfied. That is why in normal circumstances, adjudications will be seen as pointless. Either they will not be enforced by the court or the court will injunct them from taking place at the outset.
Had this been a case where an adjudicator did have the statutory power to consider the disputes arising from all three contracts in one adjudication and produce a net result, then on the basis of Meadowside, that would satisfy paragraph 87 (1) of the judgment therein. This is because, as is common ground here, there are no other claims or counterclaims lurking elsewhere which would not fall into the calculation. The adjudicator would in fact be settling the entirety of the dealings between the parties.
The only reason why the adjudicator cannot is because there are three separate contracts. But on that basis if there were three adjudications and each one produced a net result in favour of one or other of the parties, then by netting those results off against each other one would...
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