It is now clear, as decided by the Supreme Court, that an Insolvent Company can adjudicate on any dispute that exists.
The Court's will enforce the Decision (unless the Adjudicator's Decision is wrong in Law).
If the Insolvent Company (or actually the Insolvency Practitioner) commits to ring-fence the Adjudicator’s Award and provide security to adverse costs of action the Courts will either:
Enforce the Decision meaning payment must flow to the Insolvent Company (potentially temporarily); or
Allow a stay to enable a final reckoning but this must be resolved within a short time period (the Courts are suggesting six months).
The reality is that, if the Insolvent Company achieves a favourable Adjudicator’s Award, money will probably flow to it. The Insolvent Company would have this temporarily, but it would be in a strong negotiating position and generally the final decision is usually the same or similar to that of the Adjudicator. It is well known in construction that most Adjudicator’s Awards become final in reality.
To emphasise this point we would refer to a recent matter we have been involved in.
We recently acted for a Company defending three actions in Adjudication against an Insolvent Company (in Administration in this case). We managed to have one of the Adjudications withdrawn but two proceeded. The Adjudicators awarded a total of £500k against our Client.
In the past, our Client would have kept the money, resisted (successfully) enforcement of the Award and maintained a strong negotiating position as possession of the funds, associated with the Award, remained in its control. The Insolvent Company would need to start another action (Litigation ordinarily) to secure a Decision in the Courts which would have secured the payment permanently. This is usually cost prohibitive.
However, as the position was that the Court's would probably enforce the Decision and our Client would have to pay the Insolvent Company, subject to the Insolvency Practitioner committing to ring-fence the Award (£500k) and providing ATE Insurance for the adverse costs.
BUT, subject to the commitment to ring-fence and securing ATE Insurance the money would flow to the Insolvent Company and our Client would have had to start an action to overturn the Decision (and get its money back). This changes the respective positions in any negotiations with the balance now firmly in the favour of the Insolvent Company.
The Courts could refuse to enforce the Decision but insist that the matter is resolved (finally) quickly - six months has been suggested. This still puts pressure on the paying side.
We believe that, if the Insolvency Practitioner is able to commit to ring-fence monies and secure ATE Insurance, there is an extremely favourable negotiating position to be secured which could result in realising sums which in the past would have been difficult, if not impossible, to secure.
Ramskill Martin is able to provide a "one-stop shop" service. For an agreed percentage on realised sums Ramskill Martin is able to finalise all a Contractor's Accounts, resolve any disputes (if commercially viable) including via Adjudication if necessary, secure the ATE Insurance, provide legal representation and assist the Insolvency Practitioner in the final negotiation.
However, the aim is to create an environment to generate the leverage conducive to resolution of a Contactor’s Accounts effectively, efficiently and in a timeous manner.
We attach a flow diagram explaining how this process works and when leverage is generated to the Insolvency Practitioner's benefit.