Court of Appeal endorses new ground for staying adjudication decisions

United Kingdom

A Court of Appeal decision earlier this month has upheld a TCC decision identifying a new ground on which stays of execution can be obtained in relation to adjudication decisions. The Court of Appeal has confirmed that the principles for the granting of such stays set down in Wimbledon v Vago are not exhaustive. They now include situations where there is a real risk that an enforcing party would dissipate or dispose of the adjudication sum so that it would not be available to be repaid upon a final determination of the dispute.

 

Gosvenor London Limited v Aygun Aluminium UK Limited: a recap

 

For a detailed summary of the original TCC decision in this case, please see our earlier Law-Now here. In brief, Gosvenor sought to enforce an adjudicator’s decision in its favour for the sum of £553,958.47. Among other things, Aygun sought a stay of enforcement on the basis of evidence showing that, if paid, this sum would be disposed of by Gosvenor so that it would be unable to be repaid in the event that Aygun were to overturn the adjudicator’s decision in subsequent TCC proceedings.

 

The court’s power to grant a stay of execution derives from rule 83.7 of the Civil Procedure Rules, which requires “special circumstances”. The principles governing when this discretion may be exercised in adjudication cases were detailed in the 2005 case of Wimbledon v Vago. The circumstances under consideration in the present case were not covered by this judicial guidance. To that end and in granting the stay, Mr Justice Fraser formulated a new ground whereby -

 

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”

 

Gosvenor appealed this decision on the basis that Fraser J had erred in law in formulating this new ground. Alternatively, that he was wrong to find that the evidence before him gave rise to an inference that Gosvenor had intended to organise its financial affairs with the purpose of dissipating or disposing of the adjudication sum.

 

The Court of Appeal

 

The Court of Appeal upheld the TCC’s decision on all points:

 

  1. The principles set down in Wimbledon v Vago were not an exhaustive list. Mr Justice Fraser was operating within the bounds of his discretion under rule 83.7 in formulating a new ground.

  2. In exercising its discretion, the court should have regard to all the relevant evidence when considering whether or not to stay the execution of an adjudicator's decision. This is so regardless of whether that evidence was or could have been raised in the adjudication itself.

  3. Given the nature of the evidence before the court, Fraser J had applied a high evidential test and had properly found there to be a real risk that Gosvenor would arrange its affairs so as to dissipate or dispose of the adjudication sum. In this event, Aygun would be unable to recover this sum should the adjudicator’s decision be subsequently overturned and would be significantly prejudiced.

 

Conclusions and implications

 

Both the TCC and the Court of Appeal were keen to make it clear that the particular circumstances of this case were exceptional and that this new ground would apply only in very rare circumstances. A high evidential standard is required to give rise to an inference that a party is organising its affairs with the aim of dissipating or disposing of a sum to be paid under an adjudication decision.

 

Respondents may, however, now seek to use this decision 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.

 

The Court of Appeal’s confirmation that the Wimbledon v Vago principles are not an exhaustive list may also encourage respondents to argue for a further widening of the grounds on which stays may be granted in adjudication cases. Such arguments will not be accepted lightly, but the present case shows that they may succeed.

 

 

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)

 

Gosvenor London Ltd v Aygun Aluminium UK Ltd [2018] EWCA Civ 2695 (Court of Appeal)