The TCC and Court of Appeal have recently handed down several important judgments in relation to the application of the Court’s stay jurisdiction in relation to enforcement proceedings brought in respect of an unpaid adjudicator’s award.
Of particular interest have been the aspects of those decisions which deal with the obligation on the recipient party to demonstrate that it will be good for the judgment sum, were it required to repay it at a later date and the conditions that might be attached to any stay if it were not.
The CA in Gosvenor v Aygun  EWCA Civ 2695 dealt with what could be regarded as the extreme end of the scale in terms of stay applications. Gosvenor had been award some £650,000 in the adjudication but payment of that sum had been opposed on the basis of allegations of fraud (set out in a fully pleaded defence), unexplained and substantial restatements of Gosvenor’s statutory accounts and possible witness intimidation. Despite having the right to respond to those allegations Gosvenor chose not to do so – and it was against that a background that Fraser J. added new principle “(g)” to the stay principles already enunciated by Coulson J. (as he then was) in Wimbledon v Vago. Whilst Fraser felt compelled to grant summary judgment on the claim – he stayed payment unconditionally. Gosvenor appealed to the CA.
When the appeal came before the CA Govenor dropped its challenge to Fraser J.’s decision to add new principle “(g)” to those in Wimbledon v Vago and instead focused its attention on whether the judge had been right to take into account the various allegations of fraud etc. that had been advanced by Aygun in response to Gosvenor’s application for summary judgment. The Court concluded that the judge had been right to do so – in particular the fraud allegations were significant, supported by witness evidence and wholly unanswered by the Gosvenor and that by taking those allegations into account the judge had not offended against the decision of the CA in Speymill Contracts Ltd. v Eric Baskind  EWCA Civ. 120;  B.L.R. 257; 129 Con. L.R. 66 . However, what should not be overlooked is the effect that Gosvenor’s failure to file evidence in reply had on its ability to challenge the Respondent’s application for a stay of execution on the judgment.
Despite Gosvenor’s repeated and increasingly desperate attempts to adduce evidence after the SJ hearing (all of which were refused by Fraser J. and the CA) the CA confirmed that Fraser J. was fully entitled to draw an adverse inference in circumstances where Gosvenor had chosen not to filed evidence in reply. In coming to that conclusion, the Court replied on the decision of Glouster L.J. in Holyoake & Another v Candy & Others  EWCA Civ 92, where she confirmed (in relation to freezing injunctions) that:
“ ….. unless an applicant has raised a prima facie case to support a freezing order, the respondent is not obliged to provide any explanation or answer any questions posed – and nor can a purported failure to do so be held against the respondent. It is only if the applicant has raised material from which a real risk of dissipation can be inferred, that the respondent will be expected to provide an explanation. Then, in appropriate circumstances, the lack of a satisfactory explanation may give rise to an adverse inference.”
Having found that Aygun had raised a substantial prima facie case for dissipation of the award the inevitable outcome was that the Court would draw an adverse inference from the absence of rebuttal evidence.
As a basic principle it must now be regarded as unwise, in the extreme, to fail to respond to evidence submitted defendant in enforcement proceedings – at least if that evidence raises real issues for the court to consider. In particular, if the defendant’s evidence raises a credible case that there is a likelihood of dissipation – or other grounds for granting a stay – then failure to respond will invite an adverse inference to be drawn and it will certainly be too late to deflect such a finding by filing evidence after the event.
Whilst it is clear from both the CA’s decision in Gosvenor v Aygun and Holyoake v Candy that the Court may draw an adverse inference from a failure to respond to credible evidence of a likelihood of dissipation – this has not displaced the general rule that a claimant does not have to prove proactively its ability to repay the award to be entitled to enjoy the right to the receipt of a judgment sum. However, it should not be forgotten that Coulson J. in Alexander & Law Ltd v Coveside (21BPR) Ltd  EWHC 3949 (TCC) was prepared to consider prospectively the likely financial standing of the claimant company (which was already subject to winding up proceedings) when the question of the repayment of the adjudicator’s award might arise in the future and that on the evidence in that case there was no possibility that the claimant would be in a position to repay any award – and a stay was ordered. So the conclusion in Gosvenor v Aygun that in the face of a party’s total refusal to respond to the defendant’s allegations about its financial conduct etc., an adverse inference will be drawn in enforcement proceedings resulting in a stay, can hardly be said to come as a surprise.
A claimant cannot now hope to rely on what has been called an ‘asymmetry of evidence’ in relation to its financial standing and conduct to smuggle enforcement proceedings past the TCC when either by reason of circumstance or design the claimant will not be able to repay the award.
It does now seem probable that enforcement proceedings in the TCC are likely to involve more nuanced considerations of the Court’s inherent stay jurisdiction; however, such an approach comes with a danger that the general right to rapid enforcement of adjudicator’s awards will be hobbled by stays being imposed on the execution of any judgment. An approach that would run entirely against the grain of Part II of the 1996 Act – and the Courts’ oft stated view that adjudicator’s awards will be enforced immediately, even when wrong or disputed.
In those circumstances to court will need to strike a careful balance between rapid enforcement of payment on the sum awarded by the adjudicator on the one hand and protecting the interests of the paying party on the other (in much the same way as is achieved by s.111(10) of the 1996 Act in respect of the enforceability of the strict s.111 payment provisions in respect of insolvent parties).
For example, Equitix ESI CHP (Wrexham) Ltd v Bester Generation UK Ltd  EWHC 177 (TCC);  B.L.R. 281the Court determined that whilst a proportion of the award should be paid immediately to the claimant, further sums would then either be retained by the defendant or paid into court.
Whilst in BN Rendering Ltd. v Everwarm Ltd.  EWHC 2356 (TCC) the court concluded – having considered the principles originally set out in Wimbledon - that the applicant was entitled to both judgment on the adjudicator’s award and immediate payment. However, the sole director / shareholder of the company was required to provide security for repayment of the award, should that prove necessary upon final determination of the claim . The judge having concluded that the evidence pointed to the director having treated the company “…. as his personal piggybank”  and that:
“ It is the movement of money that is new and is an indication, to my mind, that the claimant would have no compunction about organising its affairs in such a way the defendant might be deprived of the adjudication sum or other assets of the company if the adjudication decisions were to be subsequently reversed and the claimant company required to repay the funds.”
Precisely the kind of situation the new Gosvenor v Aygun principle “g” is intended to deal with.
In so far as any conclusions can be drawn at present, it is probably safe to say that the somewhat complacent assumption that has grown up in relation to the automatic and rapid enforcement and payment of adjudicator’s awards must now be subject to qualification. Where the financial conduct or probity of a claimant is challenged, on credible evidence, in the enforcement proceedings then there is a likelihood of a stay – either made unconditionally or conditionally as the justice in the case requires. And, consequently, all claimants in adjudication enforcement proceedings must now assume that their financial status and conduct will be far more closely scrutinised than was previously the case – and it will not be an option for the claimant to simply refuse to respond to allegations, as this will result in the court drawing adverse an inference and imposing a stay execution on any judgment sum. Enforcement has just a little more tricky.
Dr Tim Sampson / 18th Dec 2018
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