Earlier this year, in the case of Bresco Electrical Services Limited (in liquidation) v Michael J Lonsdale (Electrical) [2019] EWCA Civ 27 ("Bresco"), the UK Court of Appeal ("EWCA") dealt with the issues of whether an adjudicator has the jurisdiction to deal with a claim by an insolvent company and whether such an adjudication could ever have any utility.

By a sub-sub-contract dated 21 August 2014, the appellant agreed to perform electrical installation works for the respondent. The appellant then became insolvent and entered into voluntary liquidation in 2015. In October 2017, the respondent intimated a claim against the appellant, on the basis that it was the appellant's fault that had led to the termination of the sub-sub-contract. The appellant then served an adjudication notice on 18 June 2018, purporting to refer to adjudication a claim that the respondent had wrongfully repudiated the sub-sub-contract, together with claims for unpaid work and other sums. The respondent applied for and was subsequently granted an injunction to prevent the continuation of the adjudication. The appellant then sought to set aside the order granting the injunction.

Pertinently, the Court confirmed that whilst the right to adjudication is not automatically lost when a party goes into liquidation, in circumstances where there is a cross-claim, any decision made in favour of the insolvent company would be incapable of enforcement and therefore "an exercise in futility". In finding that there is a basic incompatibility between the insolvency regime and adjudication, the Court observed that the rule on insolvency set-off envisages the taking of a detailed account and the careful calculation of a net balance, whereas adjudication is "a rough and ready process" which produces only a temporarily binding decision. Certainly, as the Court held, the temporary finality nature of an adjudicator's decision is not a condition or status expressly envisaged by the insolvency set-off rules.

This is in fact consistent with the local position in ­­W Y Steel Construction Pte Ltd v Osko Pte Ltd [2013] 3 SLR 380 where the SGCA held that "a stay of enforcement of an adjudication determination may ordinarily be justified where there is clear and objective evidence of the successful claimant's actual present insolvency".

Bresco aptly illustrates why the SOPA adjudication process is incompatible with the insolvency regime, and that recourse to the SOPA regime would be unwise where the applicant is insolvent.

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