The money stays where it is

Adjudication decisions – avoiding enforcement where the money may disappear

The losing party in an adjudication always asks one question - do we really have to pay?  In most cases the answer will be yes, but the list of reasons for saying no just got slightly longer.

The recent Court of Appeal case of Gosvenor London Limited v Aygun Aluminium UK Limited [2018] EWCA Civ 2695 considered this issue.  The project in question was the installation of the façade at the Ocean Village Hotel in Southampton.  Aygun were a sub-contractor on the project and employed Gosvenor as a sub-sub-contractor.  As is often the case, the project ran into delay and claims started to appear.  As at 15 May 2017, the extended completion date for Aygun’s works, it was around 97% complete. 

In September 2017 Gosvenor referred its additional costs to adjudication.  It was awarded £553,958.47 plus VAT.  This figure was over and above the original contract sum of £440,000.  Aygun refused to pay up on the decision and Gosvenor sought to enforce in the High Court.  It was at this stage that matters took a strange turn. 

In its evidence in defence, Aygun resisted enforcement and sought a stay of payment on the basis of fraud, intimidation and dissipation of assets preventing later recovery.  Aygun’s pleadings and evidence raised questions regarding Gosvenor’s accounts and accused a former employee of Aygun of collusion with Gosvenor and stealing all of the site records. Aygun also alleged that one of its senior members had been offered a bribe by Gosvenor’s director not to resist enforcement and that she was subjected to intimidation by members of Gosvenor when she refused.  Even more bizarrely, Gosvenor put in no evidence in reply to these accusations.

None of the reasons advanced by Aygun could save it from summary judgment.  However Fraser J, the trial judge, granted Aygun’s alternative request for a stay of judgment.  The reason he gave for allowing the stay was that:

“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 adjudication sum so that it would not be available to be repaid, then this will also justify a grant of stay.”

Fraser J’s judgment was upheld on appeal.

This new reason for staying enforcement is likely to be limited in its application. The facts of Gosvenor were unusual and extreme.  However if a party has been ordered to make a payment by an adjudicator, and fears that its opponent intends to dissipate the sums it has been ordered to pay, it may wish to consider applying for a stay to execution.