CVAs – not an escape from adjudication

In a pivotal ruling handed down last Thursday, the Court of Appeal has ruled that construction companies cannot avoid third party adjudication of disputes even if one of the parties is in liquidation or a company voluntary agreement.

The case marks a resolution between the conflicting processes of ‘netting off’ by insolvency practitioners and adjudication proceedings.

Prior to this, although an adjudicator had the technical power to settle a claim by an insolvent company, in the event of cross-claims their outcome would become an ‘exercise in futility’.

The decision then by Lord Justice Coulson that an adjudicator does in fact have authority of jurisdiction when the claimant is in a CVA hinged on the fact that such companies may in some cases emerge from a CVA and continue trading.

As Katherine Flynn of law firm Fieldfisher put it, ‘The case is new law: it decides, for the first time, whether or not a construction dispute can be referred to adjudication when one of the parties is in insolvent liquidation, or is in a CVA, in each case incorporating the insolvency offset rules.’

If you find yourself in a position where you believe you may be affected by this landmark ruling, give CRS a call on 0114 236 1884 for some free advice from one of our insolvency experts.

Contract Recovery Solutions are specialists in construction and commercial debt recovery, working closely with insolvency practitioners and lenders to maximise recoveries on each case we take on board.

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