Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC 1086

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

Technology and Construction Court, London

His Honour Judge Peter Coulson QC

20 May 2005

In this case the court was asked to stay the enforcement of an adjudicator's award pending final resolution of the claims by arbitration on the basis of the successful party's uncertain financial position. The court derived from case law six principles that should always govern the exercise of the court's discretion when considering a stay of execution in adjudication enforcement proceedings.  When applying these principles to the evidence before it, the Court refused to grant the stay sought by the defendant.

Mr Vago engaged Wimbledon Construction Company 2000 Limited ("Wimbledon") to carry out works at his house. Disputes arose between the parties and in January 2005 Wimbledon commenced an adjudication. The adjudicator awarded Wimbledon the sum of £122,923.34 including VAT. The sum was not paid and on 26 April 2005 Wimbledon commenced enforcement proceedings. At about the same time, Vago commenced arbitration proceedings against Wimbledon to challenge many of the adjudicator's findings. In the court proceedings, Vago consented to judgment being entered and offered to pay the full sum of £122,932.34 into court. Wimbledon refused that offer. Vago then sought an order that enforcement be stayed, pending the outcome of the arbitration proceedings on the grounds of Wimbledon's uncertain financial position.

Further, Wimbledon sought summary judgment for the sum of £6,507.97 being the agreed value of post-contract works carried out at the property. Whilst this sum was not disputed, Vago contended that he had a set-off and cross-claim in respect of alleged defects in the heating and ventilation works which, he said, operated as a complete defence to this element of the claim. Wimbledon argued that the cross-claim should be disregarded because, amongst other things, the nature of it was extremely vague. Wimbledon said that Vago had made no attempt to identify how and why the items in either of the documents that Vago sought to rely on could be said to constitute a breach of contract.

The court said that the uncertainty within Vago's own evidence as to what the proposed cross-claim might be worth typified the fact that next to no analysis or particularisation had been provided in respect of the proposed claim. Although the court recognised that a sound claim in respect of the defects might be advanced in the pending arbitration, it said that in these proceedings it was bound to conclude that Vago had no real prospect of successfully defending the claim on the basis of the scant information available to it. The court therefore rejected Vago's cross-claim and gave Wimbledon summary judgment in respect of the claim for £6,507.97 in respect of post-contract works.

The court then considered whether it should grant a stay of execution because of the financial position of Wimbledon. In reaching its decision, the court considered a number of authorities relating to the adjudication process. Having done this (and whilst accepting that each case must turn on its own facts), the court set out six principles which it said should govern the exercise of the court's discretion when it had to consider whether to grant a stay in adjudication enforcement proceedings. Those six principles were:

a) Adjudication is designed to be a quick and inexpensive method of arriving at a temporary decision;

b) As a result, adjudicators' decisions are intended to be enforced summarily and the claimant (being the successful party in the adjudication) should not be kept out of its money;

c) In an application to stay the execution of summary judgment arising out of an adjudicator's decision, the court must exercise its discretion under part 47 of the CPR with considerations a) and b) in mind;

d) The probable inability of the claimant to repay the judgment sum (awarded by the adjudicator and enforced by way of summary judgment) at the end of the substantive trial, or arbitration hearing, may constitute special circumstances within the meaning of CPR part 47 rule 1(1)(a) rendering it appropriate to grant a stay;

e) 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; and

f) Even if the evidence of the claimant's present financial position suggested that it is probable that it would be unable to repay the judgment sum when it fell due, that would not usually justify the grant of a stay if:

  • the claimant's financial position is the same or similar to its financial position at the time that the relevant contract was made; or
  • the claimant's financial position is due, either wholly, or in significant part, to the defendant's failure to pay those sums which were awarded by the adjudicator.

With these principles in mind, the court then looked at the evidence. The court said that on the evidence before it, Vago had failed to demonstrate a probable inability on the part of Wimbledon to repay the judgment debt, if that was the outcome in the arbitration process, in nine to twelve months. Wimbledon's most recent accounts showed that it was making a profit, albeit a modest one. The court said that the fact that a number of loans had been made by Wimbledon's directors and others to the company demonstrated 'a high degree of practical faith in the future of the company on the part of the directors.' and was not, as Vago had alleged, a demonstration that it would probably be unable to repay the judgment sum in nine to twelve months' time.

Further, the court decided that there was no doubt that Wimbledon's financial position, and its likely position in a year's time, were the same or very similar to its financial position at the time when the contract was made. The court was also satisfied on all the evidence that Wimbledon's financial difficulties were due, at least in significant part, to the failure on the part of Vago to pay the sums that the adjudicator found were due.

The court therefore gave summary judgment against Vago in the total sum of £129,431.31 including VAT and refused Vago's request for a stay of execution of the judgment.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

Click here to read full-screen | Click here to print the case