Construction Case Update - Adjudication - Part 3 of 2018

The witness evidence broadly supported what was pleaded. GL had served no evidence in response and only sought to adduce evidence in response to the circulation of the draft judgment. The Court held that it was far too late and refused to admit further evidence which could and should have been served as provided for by directions. The Court reviewed earlier authorities where fraud had been alleged in adjudication 16 . Jackson LJ had agreed with Akenhead J that if fraud was to be relied on in an effort to avoid enforcement or support an application to stay execution of the enforced judgment, it must be supported by clear and unambiguous evidence and argument. This led to the conclusion that fraud could be potentially relevant to a stay execution as well as enforcement. The principle of temporary finality meant that there would normally be no second bite at the cherry where fraud was unsuccessfully raised or could have been raised in the adjudication. This case was unusual. It was extraordinary that in the face of serious allegations GL chose not to put in a single word of evidence in response. However, the fact that the allegations or at least some of them could have been raised in the adjudication was a major obstacle for AA. One reason for this given by AA was the alleged intimidation of a witness which deterred her from giving evidence of fraud in the adjudication. Intimidation of witnesses was wholly unacceptable and would not be tolerated. A judge could refer matters to the Director of Public Prosecutions if necessary. No finding was made but the allegation remained un-rebutted. In addition, several of the allegations of fraud related to collateral matters and were independent of and did not directly impact on the subject matter of the decision. For the above reasons the Court felt the correct result was to grant summary judgment of the decision itself. That left the application for a stay. The same allegations of fraud were relevant together with other stay specific factors, in summary as follows: 1. Alleged fraud by GL during the works, including the gross disparity between the value of works and the values claimed on invoices. 2. The lack of financial viability of GL. 3. If paid the money would be dissipated before any substantive hearing to finally determine the dispute. 4. Statements made by GL’s director that if GL were to face a claim he would “immediately wind up the company” and that AA would “never get a penny out of him”. 5. Other companies owned by the same director had been liquidated.

The financial viability of GL was an important factor to consider. The Companies House filing history of GL was very unsatisfactory There were discrepancies in GL’s accounts which stretched credulity and were unexplained. Overall there was an air of suspicion over the financial affairs and probity of GL. The Court considered the Wimbledon v Vago 17 principles and decided that a new principle should be added: “(g) 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, that this would also justify the grant of a stay.” The Court was at pains to point out that this feature was only likely to arise in a small number of cases and in exceptional factual circumstances. This addition was not intended to reopen the whole issue of the basis upon which stays of execution might be ordered, nor to define a specific and closed set of circumstances that could constitute “special circumstances” under CPR Part 83.7(4). A high test would be applied as to whether the evidence reached the necessary standard to satisfy this new principle (g), broadly being that necessary to justify a Freezing Order. Nothing was intended to prevent a claimant dealing with the adjudication sum in the ordinary course of business or make evidence as to such intention or use of money in the ordinary course of business relevant or admissible. In all the circumstances AA was entitled in the exceptional circumstances of this case to a stay of execution in respect of the judgment sum. Comment Although it is likely to rarely apply, the Court added a new principle (g) to those well known principles from Wimbeldon v Vago . The Court also reviewed the law on fraud and concluded that it could potentially be as relevant to an application to stay execution as well as one for summary judgment. At paragraph 62 of the judgment, the Court grants a stay “in all the circumstances of this case”. Thus it would appear that regard was had to the alleged fraud as well as the evidence under new factor (g) and G’s unsatisfactory financial position in deciding to impose a stay. The judgment also pointedly states that the circulation of a draft judgment is not to be treated as an opportunity to embark on an additional round of the litigation, or for raising further arguments which could and should have been raised at the hearing.


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