New ground for staying adjudication decisions

United Kingdom

A recent TCC decision has identified a new ground on which a party may seek a stay of execution in relation to the enforcement of an adjudicator’s decision. The new ground relates to whether the enforcing party would dissipate or dispose of the adjudication award so that it would not be available to be repaid at the time the dispute was finally determined. The decision may give rise to greater and more widely drafted requests for financial information by respondents to enforcement proceedings.

Gosvenor London Limited v Aygun Aluminium UK Limited

Aygun, as a sub-contractor to Bouygues (UK) Ltd in respect of the development of the Ocean Village Hotel in Southampton, entered into a secondary sub-contract with Gosvenor for the installation of cladding and other associated façade works (the “Contract”).

The Contract was entered into in May 2016, with the works planned for completion by November of that year. Following delays to the project, a dispute between the parties was referred to adjudication in September 2017. The adjudicator found in favour of Gosvenor and awarded it the sum of £553,958.47. This award went unsatisfied and Gosvenor launched enforcement proceedings in the TCC. Aygun resisted enforcement on the basis of allegations of fraud against Gosvenor and, if unsuccessful on that ground, made an application for enforcement to be stayed pending the final determination of the dispute.

The court rejected Aygun’s fraud defence, primarily because the matters relied upon could have been raised before the adjudicator. Gosvenor was therefore entitled to summary judgment in respect of the adjudicator’s decision. Nevertheless, the court accepted that a number of allegations of improper conduct against Gosvenor had not been rebutted and proceeded to consider the whether such circumstances justified the granting of a stay.

A new ground for staying enforcement

The power to grant a stay of execution in relation to court judgments (including those enforcing adjudication awards) arises from rule 83.7 of the Civil Procedure Rules and requires the existence of “special circumstances”. What this means for adjudication enforcement was set out in an earlier TCC decision in Wimbledon v Vago (decided 13 years ago). In summary, enforcement should be awarded unless there is evidence that the financial stability of the enforcing party makes it probable that, should the adjudicator’s decision ultimately be reversed through court or arbitration proceedings, the sum awarded would not be available to be repaid. Such circumstances will, however, be insufficient if the financial position of the enforcing party was the same or similar to its position at the time the contract was entered into and/or if its current financial instability was caused, either wholly or in significant part, by the other party’s failure to pay the amounts the subject of the adjudication decision.

In this case, there were serious questions to be asked of Gosvenor’s conduct in respect of (a) allegations of fraud (albeit not argued before the adjudicator), (b) threats and intimidation carried out by its employees in relation to the TCC enforcement proceedings and (c) the “unsatisfactory and contradictory” nature of its statutory accounts. In addition, there was evidence that a director of Gosvenor had said that if the company later faced a claim from Aygun, he would “immediately wind up the company” and Aygun “would never get a penny out of him”.

Mr Justice Fraser considered that these matters qualified as “special circumstances” under CPR 83.7, but noted that the first two of them at least were not caught by the principles in Wimbledon v Vago. This meant that “the time has come to finetune the statement of the principles in Wimbledon v Vago”. To this end, Fraser J proposed to add an additional ground justifying the granting of a stay as follows:

If the evidence demonstrates that there is a real risk that any judgment would go unsatisfied by reason of the claimant organising its financial affairs with the purpose of dissipating or disposing of the judgement sum so that it would not be available to be repaid, then this would also justify the grant of a stay.

Conclusions and implications

This case formalises a new ground on which respondents to adjudication proceedings may attempt to resist enforcement. Although the court was quick to point out that this case was exceptional in respect of its facts and that this new ground would apply only in very rare circumstances, respondents are likely to use the case as a basis for requesting more detailed financial information from parties seeking to enforce adjudication decisions. Not only will an enforcing party’s financial position pre-contract and post-adjudication be relevant, but also the way in which it intends to account for and/or dispose of the amount awarded to it by the adjudicator. The extent to which enforcing parties will be able to resist such broader requests for information, and the additional time and cost they involve, remains to be seen.

References

Wimbledon Construction Company 200 Ltd v Derek Vago [2005] EWHC 1086 (TCC)

Gosvenor London Ltd v Aygun Aluminium UK Ltd [2018] EWHC 227 (TCC).