UK Supreme Court clarifies availability of construction adjudication regime in insolvency

Our colleagues have published this article on the recent Supreme Court Bresco v Lonsdale decision. The decision clarifies the effect of the insolvency regime upon the construction adjudication process and will therefore be of particular interest to our Construction Notes subscribers. In summary, the Supreme Court has confirmed that an insolvent party to a construction contract is not precluded from referring a dispute to adjudication and that an adjudicator has jurisdiction to determine the dispute. The decision also confirmed that insolvency set-off and the adjudication of construction disputes are not incompatible.

This ruling has particular importance in the current climate and going forward should there be a long term negative impact on the construction industry by COVID-19.

The judgment highlights the importance of adjudication as a dispute resolution method in its own right. However, a concern remains that that an adjudicator’s decision could later be considered unenforceable due to the cross-claims, leading to wasted costs and time. The “Meadowside exceptions” which were set out in Meadowside Building Developments Ltd (In Liquidation) v 12-18 Hill Street Management Co Ltd [2019] EWHC 2651 may assist in considering whether an adjudication is likely to proceed and result in an enforceable decision. These were applied in the recent Balfour Beatty Civil Engineering Ltd v Astec Projects Ltd (In Liquidation) [2020] EWHC 796 (TCC) case which will be considered in our upcoming Construction Notes blog.