Bresco Electrical Services v Lonsdale; Cannon Corporate v Primus Build
Citation:  EWCA Civ 27
This case concerned conjoined appeals on insolvency and construction law. In the first appeal, Bresco, a company in insolvent liquidation, sought to set aside an injunction preventing the continuation of an adjudication in which it sought payment for work done. In the second appeal, Cannon Corporate appealed against a summary judgment in favour of Primus and against the refusal to grant a stay of execution in spite of the fact that Primus as in a Company Voluntary Arrangement (CVA). The second appeal settled, but given the importance of the issues raised the court gave judgment on both cases. Lord Justice Coulson gave the leading judgment.
In Bresco it was affirmed that the contractual right to refer a claim to arbitration was not extinguished by arbitration. Indeed, the appellant was entitled to bring a contractual claim in court or arbitration. Therefore, the underlying claim continued to exist. It followed that the choice of forum could not dictate whether a claim had been extinguished. Therefore, an adjudication had jurisdiction to consider a claim advanced by a company in liquidation.
However, adjudication and insolvency are mutually incompatible. It would only be in exceptional circumstances that a company in insolvent liquidation could succeed in an adjudication, obtain summary judgment and avoid a stay of execution. Even though an adjudication might technically have jurisdiction, any decision would be incapable of enforcement and therefore futile. The solution was to grant an injunction to restrain the continuation of the adjudication.
In Cannon Corporate, Lord Justice Coulson noted that it would defeat the purpose of the HGCRA if a responding party could reserve its position on jurisdiction in general terms at the start of an adjudication. Any challenge would have to be appropriately, clearly and promptly at adjudication. It would be better for a party to reserve its position based on a specific objection so that the adjudicator could decide whether to proceed. A general reservation was likely to be ineffective if the objector knew of specific grounds for a jurisdictional objection, or if it was worded simply to ensure that all options could be kept open.
The claimant sought to raise a specific jurisdictional point for the first time on appeal, and could not be permitted to rely on their original vague general reservation of position. The judge had been correct to distinguish Westshield and grant summary judgment. Equally, a court was permitted to exercise its discretion to stay if it concluded that the party seeking the stay was ‘substantially responsible’ for the claimant’s financial difficulties. This was the conclusion reached.
Adrian Williamson QC acted for Primus Build Limited