WHETHER A COMPANY IN LIQUIDATION CAN COMMENCE ADJUDICATION
In Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd  EWHC 2043 (TCC) (“Lonsdale”), The Honourable Mr. Justice Fraser decided that a company in liquidation cannot refer a dispute to adjudication under the Housing Grants Construction and Regeneration Act when that dispute includes (whether in whole or in part) determination of any claim for further sums said to be due to that company from the responding party.
Effect of liquidation. The key reason for Fraser J’s decision is the Insolvency (England and Wales) Rules 2016: per Fraser J, “Upon liquidation, the Insolvency Rules (which have statutory force) require that an account must be taken of those dealings in each direction to arrive at a single balance due either to, or from, the company in liquidation. Such categorisation of these sums includes the sums the subject matter of the dispute referred to adjudication in this case.”
Position in Singapore. Prior to Lonsdale, Singapore’s Parliament already made clear in the Second Reading of the Building and Construction Industry Security of Payment Bill on 16 November 2014 that “Payment disputes involving insolvency are not covered under the Bill. … in the area of insolvency, there is a higher justice that must be served. There is an established priority of payments that have to be made to different parties who have suffered as a result of a party going insolvent. So this priority should not be upset just because of the payment woes in the construction industry. So we have therefore left insolvent cases alone so as not to disrupt a process which is working well.”
Insolvent claimant. Reading Lonsdale together with the Second Reading, and bearing in mind Singapore’s (current) insolvency regime, if an insolvent claimant issues a payment claim under the Building and Construction Industry Security of Payment Act, a respondent most probably can respond by challenging the claimant’s entitlement to do so on the basis that the regime is meant to apply to solvent parties only.
Of course, this raises the interesting issue of whether a respondent who fails to dispute the claimant’s entitlement to commence adjudication in its payment respond can raise such a reason. But that is an article for another day.
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