The Court of Appeal has provided guidance on when an insolvent company would be entitled to summary judgment to enforce an adjudicator’s decision.

Alice Glendenning considers the Court of Appeal decision in John Doyle Construction Ltd (in liquidation) v Erith Contractors Ltd [2020] EWHC 2451 (“John Doyle v Erith Contractors”).

Court proceedings between John Doyle Construction and Erith Contractors date back to a contract between the parties connected to the London Olympic Games in 2012. John Doyle entered liquidation in 2013, prior to a claim for enforcement of an adjudicator’s decision by way of summary judgment under CPR Part 7 brought against Erith Contractors. The High Court handed down a ruling on the claim in September 2020, which progressed to the Court of Appeal.

In this case, the Court of Appeal revisited the tension between the adjudication process and the insolvency regime, following the Supreme Court’s decision in Bresco Electrical Services Limited (in liquidation) v Michael J Lonsdale (Electrical) Limited [2020] UKSC 25 (“Bresco”).

Bresco decision

In Bresco, the Supreme Court held that the statutory regimes governing adjudication and insolvency are not incompatible and that a company in liquidation can bring an adjudication. This included where the dispute is concerned with a net balance as a result of the rules under the Insolvency Act 1986, which provides for an automatic set-off of cross-claims between the company and its creditors. While opening the door for construction adjudications by insolvent companies, the Supreme Court had noted that the enforceability of an adjudicator’s decision was to be determined by a court at the summary judgment phase.

John Doyle v Erith Contractors

John Doyle v Erith Contractors was the first consideration of a claim by an insolvent company for enforcement of an adjudicator’s decision by way of summary judgment following Bresco. The Court of Appeal’s reasoning in upholding the lower court’s decision limits what had briefly appeared to be a streamlined process for enforcement of adjudication decisions in favour of insolvent parties.

In this case, John Doyle, a subcontractor which had entered liquidation, and Erith, its contractor, had claims against each other for £4m and £3m, respectively. Following adjudication, John Doyle was awarded £1.2m and sought enforcement by way of summary judgment, in the usual way. The Technology and Construction Court refused to grant summary judgment to John Doyle as the security offered by it in relation to any cross-claims that Erith may have was inadequate. John Doyle appealed on the basis that the judge had failed to consider secondary and tertiary offers of security that had been offered during the hearing.

The judgment

The Court of Appeal upheld the judgment of the lower court, confirming that the burden on a formally insolvent claimant seeking to enforce an adjudicator’s decision was such that the least the claimant can do is make its own position in relation to security “crystal clear”, which John Doyle had failed to do.

The Court of Appeal judgment provides guidance on when an insolvent company would be entitled to summary judgment to enforce an adjudicator’s decision.

The Court of Appeal considered that where there exists a continuing set-off and cross-claim that is in dispute, even if they had been considered in the course of the adjudication, it would be inappropriate for a court to enforce the adjudicator’s decision by summary judgment. This is because an adjudicator’s decision is “necessarily provisional” and cannot be regarded as the final determination of the net balance between the parties.

Comment

Noting that this is a consequence of the insolvency rules prevailing over adjudication, the court did not consider that summary judgment was the only weapon available to an insolvent claimant having adjudicated its claim, and said that robust case management would lead to an efficient resolution. While that may be so, this decision will be significant for insolvency practitioners in adding potential barriers and costs to enforcement, and may lead to a re-evaluation of the advantages of adjudicating as a method of swift and cost-effective recovery.

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