Source: https://designamite-ems.co.uk/newsletters/view/451/%25%25Unsubscribe%25%25
Timestamp: 2019-04-25 18:39:35+00:00

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Back in March this year Fraser J gave judgment in Gosvenor London Limited v. Aygun Aluminium UK Ltd  EWHC 227 (TCC). In that case he gave summary judgment for Gosvenor in the sum of c.£533,958.47 on an application to enforce an adjudicator’s decision. Any euphoria was immediately curtailed by the fact that Fraser J also imposed a stay of execution. Gosvenor’s appeal to the Court of Appeal decision  EWCA Civ 2695 sought to challenge that stay.
In 2016 Aygun sub-contracted some cladding works to Gosvenor. A dispute over payment ensued and Gosvenor successfully adjudicated the dispute by being awarded the sum referred to above. Gosvenor then commenced enforcement proceedings in the TCC.
In serving its defence, Aygun alleged fraud by Gosvenor, something which it hadn’t raised as part of the adjudication. The reason given by Aygun for not raising fraud during the adjudication was that relevant information was not available to it at that time, and within the context of a tight adjudication timetable.
Gosvenor did not serve any reply to Aygun’s new allegations, and it was only following the publication of the draft judgment did Gosvenor attempt to adduce new evidence. It was all too late by then.
The rule established in SG South Ltd v. King’s Head Cirencester LLP  EWHC 2645, sets out the circumstances when a stay will be granted. In short, where fraudulent acts are raised subsequent to adjudication proceedings (but could reasonably have been pleaded at the time), then the fraud allegations won’t prevent enforcement.
In addition, where fraud is pleaded but the allegation couldn’t have been raised at the time of the adjudication, then it’s only those fraudulent acts which would have directly affected the adjudication decision which are likely to give rise to a stay.
General guidance as to whether a stay should be granted is set out in Wimbledon Construction Co 2000 Ltd v. Derek Vago  EWHC 1086. The guidance consists of 6 principles.
“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 it would not be available to be repaid, then this would also justify the grant of a stay”.
So despite the fact that the circumstances of the case pointed towards enforcement being granted, nevertheless Fraser J still granted a stay to Aygun. This was primarily due to the fact that there was evidence of witness intimidation and discrepancies in Gosvenor’s accounts for the years 2016/17 that weren’t satisfactorily dealt with at the hearing.
The first ground of appeal was that having found Aygun could have raised allegations of fraud at the adjudication proceedings, Fraser J was therefore bound by the SG South decision (see above) and should not have, therefore, granted a stay.
The Court of Appeal disagreed with Gosvenor’s submission. The Court said that the assessment of risk of dissipation would not have been an issue in the adjudication and, therefore, not dealt with. So a Court having to consider the risk of dissipation for the first time would need to consider all the relevant evidence regardless of whether or not it could have been raised in the adjudication. The use of the evidence to support an application for a stay is for a different purpose, and does not amount to a collateral attack on the adjudicator’s decision.
The second ground of appeal was that Fraser J was wrong to find that the evidence gave rise to an inference that Gosvenor would organise its financial affairs in such a way, so as to ensure the adjudication sum was dissipated in the event it had to be repaid.
Here the Court of Appeal endorsed what Fraser J had previously said, namely that a party which requested a stay to be granted based upon the new 7th principle defined by Fraser J (see above) has to meet the same test as is applicable in the granting of a Freezing Order – in short it’s a high test.
In addition, the proper approach to the above test was that encapsulated by Gloster LJ in Holyoake & Another v. Candy & Others  EWCA Civ 92, the essence being that there must be a real risk, judged objectively, that a future judgment would not be met because of unjustifiable dissipation of assets. …Solid evidence will be required to support a conclusion that relief is justified..
Finally, on a question as to whether Fraser J exercised his discretion correctly the Court felt that the Judge was entitled to have reached the conclusion he did regarding the evidence of Gosvenor’s accounts.
As the Court of Appeal acknowledged, it is going to be rare for a future case to have a factual background which is likely to make it fall into the new 7th principle set out by Fraser J.
Mindful of Vago it is still the case that if there is a probable inability for a claimant to repay the judgment sum at the end of a substantive trial or arbitration, then this may constitute special circumstances rendering it appropriate to grant a stay. So too will the situation whereby a claimant is in insolvent liquidation. Beyond these circumstances a stay of enforcement becomes more difficult.

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