In Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd the Court of Appeal ruled that an adjudication award in favour of a party in liquidation facing a separate cross-claim would not be enforced, because ordering enforcement would be futile. It also noted, however, that in "exceptional" circumstances, a company in insolvent liquidation (and facing a cross-claim) might be able to succeed in enforcing an adjudication award. In Meadowside Building Developments Ltd v 12-18 Hill Street Management Company Ltd the Technology and Construction Court had to consider what those circumstances might be.
It said that this exception arises where the court's legitimate concerns as to the utility of an adjudication, the preservation of the responding party's right to security for its cross-claim and the reduction or elimination of costs risk on the responding party successfully overturning the adjudicator's decision are all met by relevant safeguards. In its view, a case is likely to be an exception to the ordinary position in circumstances where:
- the adjudication determines the final net position between the parties under the relevant contract; and
- satisfactory security is provided in respect of any sum awarded in the adjudication and successfully enforced, and any adverse costs order against (or agreed by) the company in liquidation in favour of the responding party, in respect of any unsuccessful enforcement application and subsequent litigation/arbitration seeking to overturn the adjudication decision.
What is satisfactory as security is a question on the facts in the ordinary way and it may be provided incrementally (as on, e.g., any security for costs application). A combination of the liquidator undertaking to the court to ring fence the sum enforced, a third party guarantee or bond and ATE insurance may be appropriate. And any agreement to provide funding or security which permits the company in liquidation to avoid the ordinary consequences of Bresco cannot amount to an abuse of process.