5 February 2019 | Firm news | Article by Jade Zelko

The final gift of 2018 - a new ground available for those seeking a stay of execution in adjudication decisions

In the last month of 2018, the decision in the high-profile case of Gosvenor London Ltd v Aygun Aluminium UK Ltd [2018] EWCA Civ 2695, was handed down by the Court of Appeal. This decision endorses a new ground on which stays of executions can be obtained in relation to adjudication decisions.

Background

Gosvenor London Ltd (“Gosvenor”) and Aygun Aliminum UK Ltd (“Aygun”) were parties to a contract entered into in May 2016. The contract related to cladding works performed by Grosvenor to the development at the Ocean Village Hotel in Southampton.

The project fell into delay and a dispute arose between the parties, which was subsequently referred to adjudication.  The adjudicator found in favour of Gosvenor and awarded it the sum of £553,958.47. Aygun failed to make payment of the award and accordingly, Gosvenor commenced enforcement proceedings in court.

Aygun resisted enforcement on the basis of allegations of fraud against Gosvenor. In the alternative, Aygun sought for a stay of enforcement on the basis of evidence showing that, if paid, the award 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 proceedings.

Courts powers

Rule 83.7 of the Civil Procedure Rules (CPR) sets out the courts' power to grant a stay of execution in relation to judgments (including those enforcing adjudication awards). This rule requires the existence of “special circumstances”.  The case of Wimbledon v Vago [2005] EWHC 1086 (TCC) set out six grounds on which one could rely on to stay enforcement.

The facts of this case did not fit easily into any of the categories identified in Wimbledon v Vago and therefore the court granted the stay by formulating a new ground which was identified 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”

The Court of Appeal

Gosvenor appealed the stay of execution on the basis that the court had erred in law in formulating a new ground.  In the alternative, Gosvenor also appealed on the basis that the court was wrong to find that the evidence put before the court 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 upheld the decision.

It stated that:

  • The formulation of the new ground was within the courts discretion under CPR 83.7.
  • In order to determine if the new ground applied, the necessary test was a high evidential threshold (the same test applicable to freezing order). Mere assertions and isolated discrepancies in the accounts were not sufficient.
  • The court should have regard to all the relevant evidence when exercising its direction on whether or not to stay the execution of an adjudicator’s decision. This is regardless of whether that evidence was or could have been raised during the adjudication.

Comment

Whilst in most cases an adjudicator’s award will need to be paid, this decision introduces an important principle which can be relied upon to stay execution where there is a real risk that assets will be dissipated before the dispute is finally determined.

It is common practice for the losing party of an adjudication to question if an award payment actually needs to be paid.  In most cases the answer will be yes.  However, this decision introduces an important principle where the courts may grant a stay of execution where there is a real risk that assets will be dissipated before the dispute is finally determined. This is a new ground which is added to the previous six contained in the Wimbledon v Vago case. In addition, a stay can be executed on this ground regardless of the absence of supporting evidence during adjudication.  However, this is a high evidential hurdle which requires solid evidence of a real risk of dissipation.

If you would like any further information or advice on how this decision may affect you, please contact our construction team on 02922 67 5400.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

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