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On appeal from: [2019] EWCA Civ 27

This case concerns the relationship between the adjudication regime for building disputes and a rule of insolvency law called “insolvency set-off.”

Bresco and Lonsdale are electrical contractors. In 2014, Bresco carried out installation work for Lonsdale on a construction site at 6 St James’s Square, London SW1. In 2016 Bresco entered insolvent liquidation. Both parties claimed they were owed money by the other. In 2018 Bresco’s liquidators took steps to refer their £219,000 claim to an adjudicator. Lonsdale objected to the adjudication. They said Bresco’s claim (if any) and Lonsdale’s cross-claim had cancelled each other out by the process of insolvency set-off. This meant there was no longer any claim, or therefore any dispute under the contract, so adjudication was unavailable (“the jurisdiction point”). In any case the adjudicator’s decision would not be enforced until the liquidator calculated the net balance. So an adjudication was pointless (“the futility point”).

Following an appeal by Bresco, the Court of Appeal rejected the jurisdiction point but upheld the injunction on the basis of the futility point. Bresco appealed again to the Supreme Court and Lonsdale cross-appealed on the jurisdiction point.

The Supreme Court unanimously allowed the appeal and dismissed Lonsdale’s cross-appeal. The Court concluded that the adjudicator does have jurisdiction and rejected the Court of Appeal’s view that there was a basic incompatibility between adjudication and insolvency set-off.

For judgment, please download: [2020] UKSC 25

For Court’s press summary, please download: Court’s Press summary

For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing please visit: Supreme Court website 22 April 2020 morning and afternoon session and 23 April 2020 morning and afternoon session

To watch the judgment summary, please visit: Supreme Court website: 17 June 2020