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The TCC’s Decision in Equitix – A More Flexible Application of the Wimbledon v Vago Principles? Equitix ESI CHP (Wrexham) Ltd v Bester Generation UK Ltd [2018] EWHC 177 (TCC)

It has long been the accepted practice in the TCC that the scope for challenges to the summary enforcement of adjudication awards is strictly limited ...

– a pay first argue later approach has been regarded as the only means by which the underlying intention of the Housing Grants Construction and Regeneration Act 1996 can be met. This point was recently reaffirmed – if reaffirmation were necessary – in the decision in Grove Developments Ltd v S&T (UK) Ltd [2018] EWHC 123 (TCC). Absent a failure by the adjudicator to meet the requirements of natural justice – or the disclosure of fraudulent conduct by the payee that could not have been raised within the adjudication - A.T. Stannard Ltd v James Tobutt, Thomas Tobutt [2014] EWHC 3491 (TCC) – then summary judgment of an adjudicator’s award will be granted as of right.

However, it has also recognised that even in cases where the court cannot (or will not) refuse summary judgment the referring party may still be denied enforcement of the payment of the adjudicator’s award – under the Court’s power to stay any enforcement pursuant to CPR r87.4.

The power to stay enforcement is, unsurprisingly, used sparingly and the TCC’s approach has been to apply the decision of Mr Justice Coulson in Wimbledon v Vago [2005] EWHC 1086 (TCC) [2005] BLR 374, with a degree of rigidity. This was a case where the learned judge set out a number of principles that can be boiled down to a conclusion that enforcement should be stayed where the referring party would not, in all probability, be able to repay the judgment debt were it required to do so at a later date.

However, in Equitix ESI CHP (Wrexham) Ltd v Bester Generation UK Ltd [2018] EWHC 177 (TCC) Coulson J, in what will be one of his last judgments as a TCC judge, returned to his decision in Wimbledon v Vago. And, instead of confirming that these principles are to be rigidly applied, his lordship suggested a more flexible approach:

“It was, of course, not my intention that this summary should be set in stone. It was simply a summary of the main points established by the cases up to that time. It does not, for example, deal with the position where allegations of fraud are made, particularly in circumstances where those might affect the financial standing of the referring party (who is almost always the party opposing the stay).” [62] (emphasis added)

Having decided that some form of stay was necessary Coulson J. then goes on to make another important point, with regards to evidence that was before the court:

“I am confirmed in that conclusion by what I find to be the deliberately limited financial information made available by the claimant so far. It is not appropriate for a party to recover £10 million by way of an adjudication and then, in answer to legitimate concerns raised by the other side as to their financial position, effectively stonewall the requests until the last minute and beyond.” [78] (emphasis added)

The decision in Equitix is clearly important for a number of reasons. First, it provides good ground for believing that the TCC will now allow a limited degree of flexibility in its application of the Wimbledon principles, although how far that flexibility will go is a matter for further decisions of the Court when confronted with cases that would justify a refusal of enforcement, but which cannot be shoehorned into the Wimbledon principles as originally stated. However, the TCC will no doubt keep in mind the fact that the power to refuse enforcement is only to be applied to protect the payor from impecunious payees, where immediate enforcement would, in all probability, leave the payor’s s.108(3) HGCRA right to challenge the adjudicator’s award as nothing more than a dead letter.

What must not be anticipated though is the TCC suddenly using its power to stay enforcement of a judgment to stymie the general principle that adjudicator’s awards are to be paid first and challenged later. Cash flow in the construction sector will still be the touchstone of the TCC’s decision-making process.

The second crucial point that arises from the decision in Equitix is the extent to which it is now advisable for a party to provide evidence as to its financial standing when forewarned that this will be challenged during at the summary judgment hearing. It has previously been assumed that payees are under no general obligation to evidence their financial standing - see Alexander & Law Ltd v Coveside (21BPR) Ltd [2013] EWHC 3949 (TCC); 152 Con. L.R. 163 at [30]. However, it would now seem that to provide either no, or limited or partial evidence as to financial standing, when that standing is challenged on legitimate grounds, is an open invitation to the Court to ask itself whether enforcement should be stayed; no doubt the TCC wish to revisit this evidential issue in future cases and possible provide an indication as to the extent of the evidence that should be provided by the referring party.

Dr Tim Sampson / 13th Mar 2018


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