Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd
Citation: [2020] UKSC 25
Background Facts​
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The Appellant was Bresco Electrical Services Ltd (“Bresco”), a subcontractor, in liquidation.
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The Respondent was Michael J Lonsdale (Electrical) Ltd (“Lonsdale”), a main contractor for the purposes of the contract.
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Bresco agreed to perform electrical installation works for Lonsdale under a sub-subcontract dated August 2014.
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In December 2014, Bresco stopped work, later claiming it was due to Lonsdale’s repudiatory breach.
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In March 2015, Bresco went into liquidation.
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Both parties raised claims against each other: Bresco claimed unpaid sums and loss of profits; Lonsdale counterclaimed for costs of completing works.
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In 2018, Bresco served notice to refer a dispute to adjudication for payment of approx. £219,000. Lonsdale challenged the adjudicator's jurisdiction, arguing that insolvency set-off rules meant no adjudication was possible.
​Judgment
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Supreme Court decision:
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Jurisdiction: The Supreme Court held that Bresco did have a right to adjudicate, even in liquidation. The existence of cross-claims and set-off did not remove the underlying disputes under the contract.
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​Futility argument: The Court rejected the argument that adjudication would be futile because any decision would not be enforced (due to insolvency). The court stressed that adjudication is a legitimate dispute resolution mechanism even if summary enforcement may not be appropriate.
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Key outcome:
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Bresco’s statutory and contractual right to adjudicate was confirmed.
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The injunction restraining adjudication was lifted.
General Principles Developed
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Adjudication rights survive insolvency:
A company in liquidation retains the right to refer disputes under a construction contract to adjudication, even where set-off applies.
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Compatibility of insolvency set-off and adjudication:
The existence of mutual dealings and the requirement to account for net balances in insolvency do not negate the underlying contractual disputes; these can still be decided through adjudication.
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Role and purpose of adjudication:
Adjudication serves not only to resolve cash flow issues but is a mainstream, quick, and cost-effective dispute resolution process with standalone value.
The decision may have utility beyond cash flow, including clarifying final accounts and aiding the liquidator’s functions.
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Enforcement considerations:
While adjudication decisions may not always be summarily enforceable against an insolvent party, that is a matter for the enforcement stage rather than for preventing adjudication entirely.
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Judicial approach to injunctions:
Courts should be cautious about restraining statutory rights (such as adjudication) through injunctions. Adjudication should generally be allowed to proceed, and enforcement risks should be managed at the judgment stage.