Gosvenor London Ltd v Aygun Aluminium UK Ltd

A court may stay a judgment enforcing a construction adjudicator’s decision where solid evidence establishes a real, objectively assessed risk that the successful party will unjustifiably dissipate the judgment sum, leaving a future repayment judgment unsatisfied.

The court must consider all relevant evidence when assessing that risk. Evidence used, or capable of being used, in the adjudication is not excluded because the stay addresses a different issue and does not constitute a collateral attack on the adjudicator’s decision. Any overlap remains relevant to the exercise of discretion. The applicable evidential standard is broadly equivalent to that governing a freezing order.

An adjudicator awarded Gosvenor London Ltd £553,958.47 plus VAT. Fraser J granted summary judgment enforcing the award but stayed execution: [2018] EWHC 227 (TCC). The judge found a real risk that Gosvenor or its controllers would arrange its financial affairs so that the award could not be repaid following determination of the substantive dispute.

Gosvenor appealed against the stay. It argued that the judge could not rely on fraudulent conduct or evidence which had been, or could have been, raised in the adjudication. It also challenged the inference of a real risk of dissipation. The central issues were the proper scope of the stay jurisdiction, the test for dissipation, the burden of proof and the limits of appellate intervention in a discretionary decision.

1. The appeal was dismissed. A real risk that the successful adjudication party will arrange its affairs to dissipate the judgment sum can constitute special circumstances justifying a stay under rule 83.7(4) of the Civil Procedure Rules 1998.

2. An application for a stay based on dissipation requires a distinct inquiry from the adjudication. The adjudication determines liability to the payee; it does not determine whether the resulting sum will later be dissipated. The court must therefore consider all relevant evidence, including evidence used, or capable of being used, in the adjudication. Such use does not constitute a collateral attack on the adjudicator’s decision. If the adjudicator rejected particular evidence, that may be material to the court’s discretion but is not necessarily decisive.

3. The principle formulated by Fraser J was endorsed. Its application will be rare. The judge must assess any material overlap between the adjudication evidence and the evidence supporting the stay, and determine what consequence that overlap should have. The distinction drawn in SG South between matters which could have been raised in the adjudication and matters emerging later remains correct for resisting enforcement, but requires a more nuanced approach where dissipation is advanced as the basis for a stay.

4. The evidential threshold is broadly equivalent to that applicable to a freezing order. There must be a real risk, assessed objectively and supported by solid evidence, that a future judgment will not be met because of unjustifiable dissipation. Mere assertions or isolated accounting discrepancies are insufficient. The applicant bears the burden. Once it produces material supporting the inference, an unexplained or inadequately explained response may justify an adverse inference.

5. Fraser J was entitled to find that the radically altered accounts, the untrue explanation for those alterations and the discovery of creditors approximating the adjudication award constituted solid evidence of dissipation. The alleged gross overvaluation and other evidence provided some confirmation. Although the judge overstated matters by describing a stay as inevitable, his conclusion was reasonably open on the evidence. Patten and Newey LJJ agreed with Coulson LJ.

1. Court of Appeal (Civil Division): The appeal against the stay of execution was dismissed. The court upheld the judge’s exercise of discretion.

2. High Court, Queen’s Bench Division, Technology and Construction Court: Fraser J granted summary judgment enforcing the adjudicator’s award but imposed a stay of execution: [2018] EWHC 227 (TCC).

3. Adjudication: The adjudicator awarded Gosvenor £553,958.47 plus VAT.