| Date | 17 August 2005 |
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| Judgment | Wimbledon Construction Co (2000) Ltd v Derek Vago, TCC 28 May 2005 |
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| The Issue | Whether summary judgment to enforce the decision of an adjudicator will be granted in circumstances where the financial stability of the successful party is in question. |
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| Implication |
Guiding
principles given as to the circumstances in which a stay of execution
of judgment should be given in the event of uncertainty over the successful
party's financial position. |
printThe recent case of Wimbledon Construction Co v Derek Vago considered the circumstances in which the court might refuse to enforce the decision of an adjudicator where the successful party was shown to be in financial difficulties. Wimbledon had carried out construction works to Vago's house in South West London and disputes had arisen concerning the value of those works. An adjudicator was appointed who published a decision, the net effect which was to award Wimbledon the sum of approximately £120,000 inclusive of VAT. Vago refused to pay that sum and accordingly Wimbledon commenced enforcement proceedings in the Technology and Construction Court in London. At about the same time as the commencement of those proceedings, Vago commenced arbitration proceedings against Wimbledon by which he intended to challenge many of the adjudicator's findings. Recognising that he would have no clear defence to the enforcement of the adjudicator's decision, Vago consented to judgment being entered and offered to deposit the sum of £120,000 with the court to be held pending the outcome of the arbitration. That offer was refused by Wimbledon. Accordingly, Vago applied to the court for an order that the enforcement of the adjudicator's decision be stayed, that is suspended, until conclusion of the arbitration on the grounds of Wimbledon's uncertain financial position. His Honour Judge Peter Coulson carefully considered the previous cases in which this issue had been examined. In Bouygues v Dahl Jensen the Court of Appeal ordered a stay of execution of judgment enforcing an adjudicator's decision on the grounds that Dahl Jensen were in liquidation. Similarly, in Rainford House v Cadogan the court ordered a stay of execution of judgment on the basis of a strong prima facie case that the claimant was insolvent. In three other cases however, Absolute Rentals v Glencor Enterprises, Hershall Engineering v Breen Property and Total M & E Services v ABB, the court refused a stay of summary judgment and allowed enforcement of the adjudicator's decisions. Judge Coulson commented that each case must turn on its own facts, but that it did seem however that there were a number of clear principles which should always govern the exercise of the court's discretion when it is considering a stay of execution in adjudication enforcement proceedings. He set out these principles as follows; (1) Adjudication is designed to be a quick and inexpensive method of arriving at a temporary result in a construction dispute. (2) In consequence, adjudicator's decisions are intended to be enforced summarily and a claimant, being the successful party in the adjudication, should not generally be kept out of its money. (3) In an application to stay the execution of summary judgment arising out of an adjudicator's decision the court must exercise the discretion it has under the Civil Procedure Rules with the first two considerations firmly in mind. (4) The probable inability of the claimant to repay the sum awarded by the adjudicator may constitute 'special circumstances' within the meaning of the Civil Procedure Pules rendering it appropriate to grant a stay. (5) If the claimant is in insolvent liquidation, or there is no dispute on the evidence that the claimant is insolvent, then a stay of execution will usually be granted. (6) Even if the evidence of the claimant's financial position suggests that it is probable that it would be unable to repay the judgment sum when it falls due, that would not usually justify the grant of a stay if (a) the claimant's financial position is similar to its financial position at the time the relevant contract was made, or (b) the claimant's financial position is due to the defendant's failure to pay monies awarded by the adjudicator. Reviewing the evidence the judge concluded that Vago had not demonstrated a probable inability on the part of Wimbledon to repay the judgment sum if that was the outcome of the arbitration process in nine to twelve months time. Judge Coulson was impressed by the fact that the directors of Wimbledon had made loans to the company which demonstrated in his view a high degree of practical faith in the future of the business on the part of its directors. He was also in no doubt that Wimbledon's present financial position was the same, or very similar, to its financial position at the time when the contract was made. Moreover, Wimbledon's financial position appeared to be a direct result of Vago's failure to pay the sums which were found to be due by the adjudicator. In conclusion, summary judgment against Vago was given in the total amount of the adjudicator's decision, including interest and costs.
CJ-0532
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