John Doyle v Erith - The Latest Instalment in Insolvency vs Adjudication
02 November 2021
02 November 2021
Erith employed John Doyle as subcontractor to carry out hard landscaping works at the Olympic Park in 2012. Following John Doyle's insolvency, Erith completed the works and claimed that it had overpaid John Doyle by approximately £3m. John Doyle had its own claim for a final account of £4m. John Doyle sold its claim to litigation funder Henderson & Jones Limited.
John Doyle was awarded approximately £1.2m by an adjudicator and sought enforcement by way of summary judgment. The Technology and Construction Court (TCC) refused to grant summary judgment on the basis that John Doyle had offered inadequate security in relation to any cross-claims.
John Doyle appealed and the Court of Appeal rejected the appeal on the following grounds:
The Insolvency Rules provide that where a company goes into liquidation, before it is wound up, an account must be taken of what is due from the company and any creditors to each other in respect of their mutual dealings and the sum due from one must be set off against the sum due from the other.
The Court of Appeal held that as Erith maintained a set-off and cross-claim, according to the Insolvency Rules, there could be no entitlement to summary judgment. In doing so, the Court of Appeal stated that the provisional nature of an adjudicator's decision, even one concerning a final account dispute where no other significant claims arise (whether contractual or non-contractual), meant that it could not be treated as if it were a final determination of the net balance if the other party maintained that it had a cross-claim.
Accordingly, where the other party has a cross-claim, it will not be possible for an insolvent party to obtain summary judgment to enforce an adjudicator's decision.
The Court of Appeal said that "building blocks" of any security had to be in place before it can be assessed by the offeree, these being: for what? by whom? on what terms?
The Court of Appeal looked at three types of security which John Doyle alleged to have offered:
Authors: Marco D'Onghia and Tom Duncan
Cases referred to:
John Doyle Construction Limited (in liquidation) v Erith Contractors Limited [2021] EWCA Civ 1452
Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.