Bresco Electrical Services v Michael J Lonsdale
UK Supreme Court · Construction and adjudication · England and Wales · 17 June 2020
Why it matters
The UK Supreme Court's definitive word on adjudication and insolvency. It rescued adjudication as a tool for liquidators chasing money owed to failed contractors, while leaving enforcement-stage safeguards for paying parties. Every insolvency-adjacent adjudication argument now starts with Bresco.
Summary
Bresco, an electrical subcontractor in liquidation, started an adjudication claiming unpaid sums from Lonsdale. Lonsdale said the adjudication was pointless and should be stopped by injunction: once a company enters liquidation, insolvency rules automatically net off all mutual claims between the parties into a single balance, so the individual construction dispute supposedly no longer existed, and any decision for Bresco could never be enforced anyway because Lonsdale's cross-claim might wipe it out. The Court of Appeal had broadly accepted the futility point. The Supreme Court, in a judgment by Lord Briggs, disagreed on every front. The construction dispute does not vanish into the insolvency account; it survives and can be adjudicated. Adjudication is not futile for an insolvent company: a swift, expert decision can be exactly what a liquidator needs to value claims and resolve the account cheaply, and most decisions are complied with without any enforcement at all. Concerns about paying money to an insolvent estate are real but belong at the enforcement stage, where courts can refuse or condition summary judgment, for example by requiring security. The decision restored adjudication as a practical recovery tool in insolvencies, an everyday reality in construction, and it is the case to cite whenever the two regimes collide.
The detail
Parties: Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd
Case number: [2020] UKSC 25
Outcome: An insolvent company can refer a dispute to adjudication; the process is not futile or incompatible with insolvency set-off.
Applicable law: Housing Grants, Construction and Regeneration Act 1996; Insolvency Rules 2016 (insolvency set-off).
Issues in play: Two statutory regimes pulling opposite ways: insolvency law nets all mutual claims into one account, while construction law gives a fast decision on individual disputes. Which yields?
Read the full decision at UK Supreme Court ↗
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