Bresco Electrical Services Ltd ((in Liquidation)) v Michael J Lonsdale (Electrical) Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeLord Justice Coulson,Lady Justice King,Sir Andrew McFarlane
Judgment Date24 Jan 2019
Neutral Citation[2019] EWCA Civ 27
Docket NumberCase No: A1/2018/2009 & A1/2018/1835

[2019] EWCA Civ 27

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE QUEEN'S BENCH DIVISION

(Technology and Construction Court)

Mr Justice Fraser

HT2018000186

&

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE QUEEN'S BENCH DIVISION

(Technology and Construction Court)

His Honour Judge Waksman QC

CL-1999-000004

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

THE PRESIDENT OF THE FAMILY DIVISION

( Sir Andrew McFarlane)

Lady Justice King

and

Lord Justice Coulson

Case No: A1/2018/2009 & A1/2018/1835

(2009)

Between:
Bresco Electrical Services Limited (in liquidation)
Appellant
and
Michael J Lonsdale (Electrical) Limited
Respondent

(1835)

Cannon Corporate Limited
Appellant
and
Primus Build Limited
Respondent

Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd

Mr Peter Arden QC & Ms Chantelle Staynings (instructed by Blaser Mills LLP) for the Appellant (Bresco)

Mr Thomas Crangle (instructed by Fladgate LLP) for the Respondent (Lonsdale)

Cannon Corporate Ltd v Primus Build Ltd

Mr Robert-Jan Temmink QC & Ms Charlotte Cooke (instructed by Fieldfisher LLP) for the Appellant (Cannon)

Mr Adrian Williamson QC and Mr Peter Shaw QC (instructed by Child & Child Solicitors) for the Respondent (Primus)

Hearing Date: Wednesday 28th November 2018

Approved Judgment

Lord Justice Coulson
1

Introduction

1

These conjoined appeals raise important issues as to the interplay between the construction adjudication process, on the one hand, and the insolvency regime, on the other. Ever since the decision of this court in Bouygues (UK) Limited v Dahl-Jensen (UK) Limited [2000] BLR 522, where the point arose in a distinctly unsatisfactory way, the extent (if at all) to which an adjudicator can decide claims made by an insolvent company which can then be summarily enforced has not remained free from doubt. It is hoped that the guidance given below will be of some assistance on this issue.

2

In the Bresco appeal, Bresco Electrical Services Ltd (in liquidation) (“Bresco”) seek to set aside the order of Fraser J dated 31 July 2018 by which, at the request of Michael J Lonsdale (Electrical) Ltd (“Lonsdale”), he granted an injunction preventing the continuation of an adjudication in which Bresco (who are in insolvent liquidation) sought declarations and sums said to be due and payable by Lonsdale. The basis for the injunction was Bresco's insolvency and Lonsdale's cross-claim. In the Cannon appeal, Cannon Corporate Ltd (“Cannon”) seek to set aside the order of HHJ Waksman QC (as he then was) dated 27 July 2018, by which he granted summary judgment in favour of Primus, and refused to grant a stay of execution, notwithstanding the fact that, due to solvency issues, Primus were in a Company Voluntary Arrangement (“CVA”). The unspoken suggestion throughout this appeal was that, since they gave rise to markedly different outcomes, one or other of these judgments must be wrong.

3

The Bresco appeal raises directly the issue of whether an adjudicator can ever have the jurisdiction to deal with a claim by a company in insolvent liquidation. But there was also a related issue, concerned with whether (assuming that the adjudicator had the necessary jurisdiction) such an adjudication could ever have any utility and, if not, whether an injunction preventing the continuation of what would be a futile exercise was justified in any event.

4

In the Cannon appeal, despite Primus' CVA, there were a number of adjudications between the parties, followed by summary judgment in their favour in the sum of £2.128 million odd, and a refusal of any stay of execution. The jurisdiction/utility issue, raised successfully by Lonsdale in the Bresco appeal when they obtained their injunction from Fraser J, was not raised by Cannon before the adjudicator or – as I find at paragraphs 96–98 below – before HHJ Waksman QC. Thus, although Cannon now wish to take the same jurisdictional point that Lonsdale successfully argued in their case, Primus submit that the argument is not open to Cannon because they did not take the point before the adjudicator, thereby waiving any right to raise a jurisdictional challenge. That therefore raises a separate issue in the Cannon appeal as to waiver and the proper scope of what is sometimes referred to as a general reservation of position. The Cannon appeal also raises questions as to the exercise of the judge's discretion both in relation to his decision to grant summary judgment in favour of Primus and, more particularly, his decision to refuse Cannon's application for a stay of execution.

5

On 12 December 2018, two weeks after the hearing, and when this judgment was in an advanced state of completion, the court was informed that the Cannon appeal had settled. In their courteous letter, leading counsel acknowledged that, despite their compromise, the court retained a discretion as to whether or not to hand down the judgment in the Cannon appeal. Given the close links between the issues raised in the two appeals, and the important issue as to waiver raised in the Cannon appeal, it was decided that our judgments would address both appeals and be handed down in the usual way. The parties were informed of this decision on 13 December 2018.

6

This judgment is set out in the following way. In Section 2 (paragraphs 9–13 below), I set out the facts of the Bresco appeal. In Section 3 (paragraphs 14–36 below), I deal with the jurisdiction arguments raised in that appeal and, in Section 4 (paragraphs 37–61 below), I deal with the related question of the utility of an adjudication in these circumstances, and the extent to which the responding party can obtain an injunction to halt the adjudication at any earlier stage. Section 5 (paragraphs 62–63 below), sets out what I consider to be the necessary disposal of the Bresco appeal.

7

In Section 6 (paragraphs 64–81 below), I set out the facts in the Cannon appeal. In Section 7 (paragraphs 82–100 below), I deal with the arguments as to waiver and general reservations of position, and in Section 8 (paragraphs 101–114 below), I deal with the discretion arguments. In Section 9 below (paragraphs 115–118 below), I set out my conclusions on the issues raised in the Cannon appeal, bearing in mind the parties' compromise. In Section 10 (paragraph 119 below) there is a short summary of my proposed disposal of these appeals.

8

At the outset I should express my thanks to all counsel for their clear written and oral submissions, and the efficiency with which the appeal hearing itself was conducted 1. I apprehend that some of the arguments as to the insolvency regime and the Insolvency Rules 2016 (“the Rules”) which were addressed to this court have not been raised at an adjudication enforcement hearing before. That is one reason why, in one respect at least, I find myself departing from some of the first instance authorities.

2

. Bresco v Lonsdale: The Facts

9

By a sub-sub-contract dated 21 August 2014, Bresco agreed to perform electrical installation works for Lonsdale at 6, St James Square, London SW1. Bresco became insolvent and entered into voluntary liquidation on 12 March 2015. Mr Ailyan of Abbot Fielding Limited was appointed as the liquidator. It has never been suggested that their liquidation was caused or substantially caused by Lonsdale.

10

By a letter dated 2 October 2017, Lonsdale intimated a claim against Bresco, on the basis that it was Bresco's default that had led to the termination of the sub-subcontract. Lonsdale indicated a claim in the sum of £325,541.92, principally made up of the costs of engaging a replacement sub-sub-contractor. Bresco responded by suggesting that it was owed money for work it had carried prior to the termination. Bresco did not at that stage suggest that Lonsdale had wrongly terminated the sub-sub-contract.

11

Over 3 years after the liquidation, on 18 June 2018, Bresco served an adjudication notice, purporting to refer to adjudication a claim that Lonsdale had wrongfully repudiated the sub-sub-contract, together with claims for unpaid work and other sums, amounting to £220,000 odd. On 21 June, Mr Tony Bingham was appointed as the adjudicator. Lonsdale asked the adjudicator to discontinue the adjudication on the basis that he had no jurisdiction, because Bresco were insolvent and had been placed into insolvent liquidation. Mr Bingham refused to discontinue the adjudication and produced a “non-binding decision” which indicated that he thought he did have jurisdiction to determine the dispute. In consequence, Lonsdale issued Part 8 proceedings in the Technology and Construction Court (“TCC”) seeking an injunction to prevent the continuation of the adjudication.

12

The matter came before Fraser J on 11 July 2018. His reserved judgment was handed down on 31 July 2018 ( [2018] EWHC 2043 (TCC)). He dealt with a number of the authorities which I revisit in Section 3 below. He granted a declaration to the effect that:

“A company in liquidation cannot refer a dispute to adjudication when that dispute includes (whether in whole or in part) determination of any claim for further sums said to be due to the referring party from the respondent party.”

13

In summary, he reached that view for two reasons. First, on the authorities, Fraser J concluded that the adjudicator did not have the necessary jurisdiction to deal with a claim advanced by a company in insolvent liquidation. Second, when dealing with the case of Philpott & Another v Lycee Francais Charles De Gaulle School [2015] EWHC 1065 (Ch) (a case which I address below, in which HHJ Purle QC held that it was “inconceivable” that any adjudicator's decision in favour of a company in insolvent liquidation would be enforced), Fraser J noted at [51.3]:

“3. The statement that adjudication is an available process, but the courts will not enforce it, ignores two important elements....

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3 firm's commentaries
  • Construction Law: Our Christmas Top Ten For 2019
    • United Kingdom
    • Mondaq UK
    • 16 December 2019
    ...from the Courts in 2019: Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd / Cannon Corporate Ltd v Primus Build Ltd [2019] EWCA Civ 27 Judgment: 24 January 2019 Adjudication and insolvency are mutually incompatible. Only in exceptional circumstances would a company in in......
  • Mitigating Insolvency Effects In The Supply Chain
    • United Kingdom
    • Mondaq UK
    • 26 July 2019
    ...was considered inBresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd, Cannon Corporate Ltd v Primus Build Ltd [2019] EWCA Civ 27. In summary, the Court of Appeal found that: '... the adjudication process on the one hand, and the insolvency regime on the other, are incompati......
  • Can A Company In Liquidation Take Part In An Adjudication?
    • United Kingdom
    • Mondaq UK
    • 19 December 2019
    ...case Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd; Cannon Corporate Ltd v Primus Build Ltd [2019] EWCA Civ 27, where it was found that an Adjudicator did have jurisdiction to make a decision, despite Bresco being in liquidation. However, because Bres......

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