Kerry Underwood

INSOLVENCY PROHIBITION IN BRESCO IS NOT ABSOLUTE

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Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

 

Meadowside Building Developments Ltd (In Liquidation) v 12-18 Hill Street Management Co Ltd [2019] EWHC 2651 (TCC) (10 October 2019)

raised important points of principle arising out of the Court of Appeal’s decision in

Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27

when the court said if a company was in insolvent liquidation, it was “an exercise in futility” to allow an adjudication to continue; while an adjudicator had theoretical jurisdiction, it was of no practical use if a court would inevitably grant an injunction to prevent the adjudication from continuing.

However, the judge envisaged that exceptional circumstances may arise.

Here, the judge said that a case “is likely to be an exception” where the adjudication deals with a final net position between the parties under the relevant contract, and where satisfactory security is provided both in respect of any sum awarded in the adjudication, so that it could be repaid if overturned in the future, and in respect of any adverse costs order made against the insolvent company covering both adjudication enforcement and future litigation or arbitration costs.

It will be a question of fact as to what “satisfactory security” is, but it may be a liquidator undertaking to ringfence the adjudication sum so that it cannot be disturbed, or a third party providing a guarantee or bond, or it might be After-the-Event insurance.

In fact here, the court refused the application by the claimant for summary judgment, as it held that the funding agreement was subject to the Damages-Based Agreements Regulations 2013, but failed to comply with those regulations and thus was unenforceable as it was champertous.

I will deal with that issue in detail in another blog, but on the facts of this case it may well be that the decision is wrong in that, at paragraph 97, the judge appears to accept that the mere providing of financial assistance amounts to “claims management services”, an argument strongly rejected by the Competition Appeal Tribunal in

UK Trucks Claim Limited v Fiat Chrysler Automobiles N.V. and others and DAF Trucks NV and others and Road Haulage Association Limited v MAN SE and others and Daimler AG [2019] CAT 26

It is true that here the court held that the funder was supplying other services, which may have brought it within the definition of claims management service provider.

In any event, it will be rare that a decision on liability is influenced by the type of funding arrangement and therefore the significance of this decision are the factors required to establish an exception to the rule in

Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27.

See my blog –

COMPANY IN LIQUIDATION CANNOT COMMENCE ADJUDICATION

 

Underwoods Solicitors are the solicitors for Crowe UK LLP, the Joint Liquidators of the Cambridge Analytica Group of Companies

Written by kerryunderwood

November 13, 2019 at 9:19 am

Posted in Uncategorized

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