The Bresco story: insolvent claimants and adjudication

The question of whether or not a company in liquidation could ever enforce an adjudicator’s decision in its favour has been one which has much exercised the courts over the past two years. In June 2020, the Supreme Court set out the definitive view. Jeremy Glover takes up the story.

Bresco in the TCC and Court of Appeal

Lonsdale and Bresco entered into a subcontract for electrical installation works. Bresco left the site in December 2014. Both Bresco and Lonsdale alleged wrongful termination against the other. In late October 2017, Lonsdale initiated a claim against Bresco for the direct costs of completing the works said to have been caused by this termination. Bresco, on the other hand, maintained that it was Lonsdale who owed Bresco money. However, on 12 March 2015, Bresco went into liquidation. On 18 June 2018, Bresco initiated an adjudication against Lonsdale in relation to a dispute under a contract for electrical installation works. Lonsdale invited the adjudicator to resign on the basis that he had no jurisdiction as a result of Bresco having become insolvent and placed into liquidation. The consequence of this, Lonsdale said, was that the relationship between the parties was now governed by the Insolvency Rules. The adjudicator declined to resign. 

Lonsdale therefore issued Part 8 proceedings which led to Mr Justice Fraser having to consider the following question:

Can a company in liquidation refer a dispute to adjudication when that dispute includes (in whole or in part) determination of a claim for further sums said to be due to the referring party from the responding party? 

The Judge considered that the sums claimed to be due from Lonsdale to Bresco, and the sums claimed from Bresco to be due to Lonsdale, fell within the definition of “mutual dealings” under the Insolvency (England and Wales) Rules 2016 and were therefore caught by the requirement under the Rule. He concluded that a dispute in relation to the taking of an Insolvency Rules’ account is not “a dispute arising under the contract”; it is a dispute arising in the liquidation. This meant that the adjudicator here did not have jurisdiction to determine the dispute referred to him. The dispute referred to him included both money claims and cross-claims, and an analysis of how much was owed to Bresco. 

The case moved to the Court of Appeal1. Coulson LJ said that he could see no reason why, purely as a matter of jurisdiction, a reference to adjudication should be treated any differently from a reference to arbitration. If the contractual right to refer the claim to arbitration is not extinguished by the liquidation, then the underlying claim must continue to exist. That a reference to adjudication may not result in a final, binding decision could not mean that the underlying claim was somehow extinguished. 

However, there was a second issue: what is the utility (if any) to be derived from the adjudicator’s theoretical jurisdiction, when the claiming company is in insolvent liquidation and the responding party has a cross-claim? Coulson LJ referred to the: “basic incompatibility between adjudication and the insolvency regime. Adjudication is a method of obtaining an improved cash flow quickly and cheaply; the insolvency regime is ‘an abstract accounting exercise, principally designed to assist the liquidators in recovering assets in order to pay a dividend to creditors’.” Reviewing the existing authorities, the Judge noted that a decision of an adjudicator in favour of a company in liquidation, like Bresco, would not ordinarily be enforced by the court. Judgment in favour of a company in insolvent liquidation (and no stay), in circumstances where there was a cross-claim, would only be granted in an “exceptional” case: 

“a reference to adjudication of a claim by a contractor in insolvent liquidation, in circumstances where there is a cross-claim, would be incapable of enforcement and therefore ‘an exercise in futility’”. 

Accordingly, although LJ Coulson considered that it was wrong to say that the adjudicator had no jurisdiction to consider this claim, he agreed that Lonsdale were entitled to an injunction to prevent the adjudication continuing. In other words, whilst in theory it is possible for companies in liquidation to start an adjudication, it may well be the case that there will be good grounds to obtain an injunction to restrain or stop that adjudication.

Bresco in the Supreme Court

Lord Briggs’ judgment2 is important for a number of reasons. First, it is a significant endorsement by the Supreme Court of the value of adjudication. Lord Briggs noted the “chorus of observations, from experienced TCC judges and textbook writers” to the effect that adjudication does, in most cases, achieve a resolution of the underlying dispute which becomes final. He also confirmed that adjudication has: 

“as was always intended, become a mainstream method of ADR, leading to the speedy, cost effective and final resolution of most of the many disputes that are referred to adjudication”.

These comments perhaps help to explain why the Supreme Court allowed the appeal by Bresco and decided that there is no incompatibility between the statutory adjudication and insolvency regimes. As a result of this judgment liquidators, both in this case and generally, will, subject to certain important qualifications, be able to pursue claims through adjudication. That said, whilst the Supreme Court held that adjudicators would have jurisdiction to consider disputes referred by insolvent companies, it also made clear that the TCC would continue to have discretion to consider whether or not to enforce the adjudicator’s decision. Lord Briggs was clearly reaffirming the current position that: 

“Where there remains a real risk that the summary enforcement of an adjudication will deprive the respondent of its right to have recourse to the company’s claim as security (pro tanto) for its cross-claim, then the court will be astute to refuse summary judgment.”

In adopting this view, the Supreme Court took a similar position to two recent judgments, Meadowside Building Developments Ltd v 12-18 Hill Street Management Co Ltd3 and Balfour Beatty Civil Engineering Ltd v Astec Projects Ltd,4 where the TCC seemed to accept that adjudications brought by insolvent companies could potentially proceed subject to proper security being provided to the potential responding party. Astec obtained funding from a boutique investment fund, which focused on construction insolvencies and had legal expenses and after the event insurance. Even so, the court would only allow the adjudications to proceed if adequate security was given in respect of the decision amount and any potential adverse costs orders (including enforcement and any subsequent action to bring about a final resolution of the dispute). This may well be the future way forward, as Lord Briggs also noted that in many cases the liquidator might not seek to summarily enforce the decision or alternatively might offer appropriate undertakings in terms of costs or to ring-fence any enforcement proceeds.

The Wimbledon v Vago principles too remain in place, which mean that adjudication decisions obtained by insolvent companies will still be vulnerable to applications for a stay. The key to how this all plays out was going to be the TCC as the court inevitably faces a temporary increase in enforcement challenges in this type of adjudication. And the first case came in October 2020.

The first post-Bresco case

The case of John Doyle Construction Ltd v Erith Contractors Ltd5 had actually been adjourned to be heard after that decision was handed down. JDC, who had been in liquidation since June 2013, made a claim for the summary enforcement of an adjudicator’s decision. The claim was for sums JDC claimed to be due on its Final Account for hard landscaping works before the 2012 Olympic Games. (And, it should be noted, the Judge questioned whether the streamlined, fast-track TCC procedure for enforcement of decisions was designed to deal with issues that arise where decisions are, like this one, years, not months, old.) JDC commenced the adjudication in January 2018, claiming approximately £4 million, a sum the adjudicator reduced to £1.2 million. 

In August 2016, the liquidators contacted Henderson Jones (“HJ”) whose primary business was described as being to “purchase legal claims from insolvent companies”. Mr Justice Fraser explained that following Bresco, the principles to be applied when considering summary enforcement in favour of a company in liquidation are: 

  • Whether the dispute is one in respect of the whole of the parties’ financial dealings under the construction contract in question, or simply one element of it.
  • Whether there are mutual dealings between the parties that are outside the construction contract under which the adjudicator has resolved the particular dispute.
  • Whether there are other defences available to the defendant that were not deployed in the adjudication. 
  • Whether the liquidator is prepared to offer appropriate undertakings, such as ring-fencing the enforcement proceeds, and/or where there is other security available. In Meadowside three mechanisms of security were considered: undertakings by the liquidators; a third party providing a guarantee or bond; and After the Event (ATE) insurance.
  • Whether there is a real risk that the summary enforcement of an adjudication decision will deprive the paying party of security for its cross-claim.

With particular regard to the first point, the Judge noted that small disputes, or tightly defined disputes which had been referred for tactical reasons, would not, if the referring party is in liquidation, be suitable. This would mean that:

“the type of overly-technical dispute concerned with services of notices within a particular number of days that are called ‘smash and grab’ adjudications would rarely if ever … be susceptible to enforcement by way of summary judgment by a company in liquidation”. 

The decision of the adjudicator would have to resolve (or take into account) all the different elements of the overall financial dispute between the parties. So where, as here, the dispute referred was the valuation of the referring party’s final account, summary judgment would potentially be available.  

The mere fact that a responding party has a claim on another contract, or arising under other mutual dealings, against the party seeking to enforce its adjudication decision, was not itself sufficient to defeat enforcement. It would depend on the size of the claim. Here there was a small claim of £40k on another project. That was not enough. The “real battleground” here was whether there was a real risk that the summary enforcement of an adjudication decision would deprive the paying party of its right to have recourse to that claim as security for its cross-claim. 

JDC sought to rely upon what was said to be a draft letter of credit from HJ’s bankers, and an ATE policy. Mr Justice Fraser said that the primary concern, when considering whether there was a real risk that summary enforcement of the adjudicator’s decision would deprive the paying party of security for its cross-claim, was recovery of the sum paid by way of satisfying the adjudicator’s decision. A secondary concern was the costs incurred in winning the money back. Both of these concerns could, in theory at least, be met by appropriate safeguards. 

Here, no undertakings at all were offered from the liquidators. No ring-fencing was available, so no security was offered by the liquidators in any respect. JDC relied upon security from HJ which was said to provide “reasonable assurances” to Erith that, should it successfully overturn the adjudicator’s decision in later proceedings, JDC would be able to (i) repay the capital sum and (ii) meet any adverse costs orders.

This security was said to be by way of letter of credit, and an ATE insurance policy. The former was to deal with recovery of the sum awarded in the adjudication; the latter was to deal with the litigation costs. Erith relied upon the agreements that JDC and the liquidators had with HJ under which HJ retained at least 55% of the sums recovered including any costs recovery. This prima facie would contravene Regulation 4 of the Damages Based Agreements Regulations 2013 and hence be unenforceable. 

For the Judge, it was the quality of the security that was of central importance. Here, there was no letter of credit available. Instead there was “a so-called letter of intent”from HJ’s bankers. This led to a number of difficulties. For example, the bank’s letter required the whole judgment sum to be paid to HJ when about 45% of that belonged to the liquidator. There was no evidence of the bank’s own detailed conditions for granting letters of credit, which HJ would have to satisfy. JDC were effectively accepting that no security was available but also saying that HJ would provide it. But HJ said it would only provide it if Erith paid over the money, and even then, all HJ could do was promise to apply for it. 

This did not equate to any safeguard that sought to place Erith in a similar position to the one which it would be in were JDC solvent. The Judge then turned to the security said to be available in respect of Erith’s costs. Here, the ATE cover available was not sufficient. Again, it would not place Erith in a similar position to that which it would occupy were JDC solvent. 

The result of this was that the security available (or which was said to be potentially available, were the judgment sum to be paid to HJ) was insufficient and the summary enforcement application was refused. 


Mr Justice Fraser, in the JDC case, stressed that this did not mean that no company in liquidation could ever enforce an adjudicator’s decision in its favour. Liquidators may offer appropriate undertakings, such as to ring-fence any enforcement proceeds. These would be powerful points in a claimant’s favour on an enforcement application. There were also a variety of different methods and models available to liquidators. Simply because one party to a construction contract is in liquidation, this does not entitle the other party to that contract to a windfall. The enforcement here fell on its own facts. 


Indeed, there was a second case in September 2020, this time in the London County Court. However, in Styles & Wood (in administration) v GE CIF Trustees6, the facts were very different. S&W commenced an adjudication on 14 February 2020, but went into administration on 28 February 2020. The adjudicator awarded S&W some £700,000. Here, the administrators offered to ring-fence the adjudicator’s award, and also offered an ATE policy as security for the potential arbitration costs. There was also no third-party funder.  HHJ Partfitt granted summary enforcement and did not impose a stay. This was on the condition that the ATE policy was provided, and the sums to be paid over were ring-fenced as offered, with such ring-fencing to continue until the conclusion of any appeal process from the arbitrator’s award.

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  • 1. [2019] EWCA Civ 27
  • 2. [2020] UKSC 25
  • 3. [2019] EWHC 2651 (TCC)
  • 4. [2020] EWHC 796 (TCC)
  • 5. [2020] EWHC 2451 (TCC)
  • 6. Case No: G20CL072