In Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] ECWA Civ 27, the Court of Appeal (with the leading judgment given by Coulson LJ) concluded that there was a “fundamental incompatibility between the adjudication regime and the insolvency set-off regime" (paragraph 42).
The Court of Appeal’s judgment was overturned by the Supreme Court in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 with Lord Briggs noting: “I do not regard construction adjudication as in any way incompatible with the operation of the insolvency code in general, or with insolvency set-off in particular.” (paragraph 42)
For many, it is therefore surprising that, despite Lord Briggs’s findings in Bresco, the Court of Appeal (with the leading judgment again given by Coulson LJ) has today concluded in John Doyle Construction v Erith Contractors [2021] EWCA Civ 1542 that there remains a “fundamental incompatibility between the adjudication regime and the insolvency set-off regime” (paragraph 93).
This judgment creates significant uncertainty for insolvent claimants in the construction industry, which is especially unhelpful in the post-pandemic era. This decision may unfortunately encourage non-payment of amounts due to insolvent companies and could embolden contractors to refuse to pay insolvent entities.
John Doyle will now pursue its claim through the Courts. The adjudication decision in its favour may not be directly enforceable but, as noted by Coulson LJ, “the fact that the adjudicator has apparently considered the claims and found in the claimant’s favour will put the defendant on the back foot throughout” the ensuing litigation.
