A recent decision in Michael J Lonsdale (Electrical) Limited v Bresco Electrical Services Limited (In Liquidation) [2018] (TCC) has held that a company in liquidation cannot refer a dispute to adjudication when that dispute includes (whether in whole or in part) determination of any claim for further sums said to be due to the referring party from the responding party. 

Background

Background to the Case In this case, the High Court scrutinised the conduct of the administrators appointed by a secured lender, Dunbar Assets plc, over a company, Angel House Developments Limited, whose sole asset was an office block in the London Docklands. The sole shareholder of the company had accused the administrators of breaching a number of duties.

House of Fraser (HOF) has been in the headlines for months. It started with reports of widening losses and being dragged down by soaring costs and a drop in consumer sales, but official comment from the 169-year old retailer remained positive. Then there were rumours of CVAs and negotiations with landlords leading to further controversy. Finally, last Friday (10 August 2018), a stock market announcement delivered the news that Mike Ashley’s Sports Direct had brought House of Fraser out of administration for £90 million, just hours after the store had announced its collapse.

The Technology and Construction Court (TCC) has delivered a significant judgment in Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (in liquidation) [2018] EWHC 2043 (TCC) where the company seeking to refer a dispute to adjudication was in liquidation. The substance of the dispute related to the contractor's claim for payment allegedly due for work completed, and damages for loss of profits.

The contract and the facts

The UK and the US have historically been perceived as leading jurisdictions in the development of restructuring and insolvency law – to the extent that dozens of local insolvency regimes around the world have been modelled on some combination of their processes. Both regimes are highly sophisticated, and feature well-developed legislation supported by decades of case law that offers both debtors and creditors alike a degree of certainty and predictability that is not always available in other jurisdictions.

A recent TCC decision highlights the dangers of withholding payment against contractors with a view to pushing them into insolvency. The court allowed the recovery of insolvency professional fees as well as a substantial sum reflecting a reduced settlement reached with a third party on a separate project. The court’s decision has ramifications for any party seeking to withhold large payments under a construction contract against a party who is likely to suffer serious cash-flow pressure as a result.

It is common knowledge to many that parties to a construction contract have the right to adjudicate at any time. This is a right implied by statute and a right that cannot be fettered. However, it seems the limits of such a right are now somewhat more nuanced. In the recent case of Michael J. Lonsdale (Electrical) Limited v Bresco Electrical Services Limited (in Liquidation) [2018] EWHC 2043 Fraser J has considered how the Insolvency Rules and Adjudication work together and what this means for the right to adjudicate at any time.

Orexim Trading Limited v (1) Mahavir Port and Terminal Private Limited ("MPT") (2) Singmalloyd Marine (S) PTE Limited ("Singmalloyd") (3) Zen Shipping and Ports India Private Limited ("Zen") [2018]

In a decision that will be of particular interest to creditors and insolvency practitioners contemplating section 423 Insolvency Act claims against defendants based outside the EU, the Court of Appeal has refused a claimant permission to serve a claim out of the jurisdiction.

The Judgment handed down by the Court of Appeal in Orexim Trading Ltd v Mahavir Port And Terminal Private Ltd (formerly known as Fourcee Port and Terminal Private Ltd) [2018] EWCA Civ 1660, [2018] All ER (D) 101 (Jul) on 13 July 2018 provided important clarification as to the service of claims under s.423 of the Insolvency Act 1986 ("IA 1986") out of the jurisdiction.

The Facts

Guglielmo Verdirame of 20 Essex Street is advising on diplomatic immunity issues in the bankruptcy case of three-time Wimbledon champion Boris Becker. Together with Tony Beswetherick of 20 Essex Street, Guglielmo is instructed by Julian Cahn of Stephenson Harwood to act for the trustees: Mark Ford, Finbarr O'Connell and Gilbert Lemon. Mr Becker is claiming diplomatic immunity from bankruptcy proceedings on the basis that he is a diplomat for the Central African Republic.