Practical Law

I acted for the claimant in Anrik Limited v AS Leisure Properties Limited (8 January 2010, unreported). We were before Mr Justice Edwards-Stuart in the Technology and Construction Court (TCC).

Two important points arise from this case:

• What date will the court assess a change in financial position on an application for a stay of execution of a judgment to enforce an adjudicator’s decision?
• Does the party applying for a stay of execution have to demonstrate an arguable case that the adjudicator’s decision was wrong?

Facts in Anrik v AS Leisure

AS Leisure Properties Ltd (AS) applied for a stay of execution of an order for summary judgment in respect of an unsatisfied adjudicator’s decision.

The dispute before the adjudicator was whether the parties had entered into an enforceable contract in 2006 and, if they had, whether Anrik Ltd (Anrik) was entitled to damages under that contract. In order to avoid any jurisdictional issues, the parties entered into an ad-hoc adjudication agreement and an adjudicator was appointed to determine the dispute. The ad-hoc adjudication agreement expressly incorporated the Scheme for Construction Contracts 1998, and was entered into 6 weeks before the adjudicator’s decision.

The adjudicator decided that there was an enforceable contract and awarded Anrik £516,000 in damages. AS refused to satisfy the award, but conceded that Anrik was entitled to summary judgment. AS applied to stay execution and offered to pay the full award into court pending the determination of its claim for a declaration that no enforceable contract had been entered into between the parties.

Anrik’s financial position: what date is relevant?

The basis of AS’s stay of execution application was its claim that there was a real risk that Anrik would be unable to repay the judgment sum if it was ordered to do so at the end of the proceedings. To support this, AS argued that there had been a significant deterioration in the financial position of Anrik between the date of the alleged contract in 2006 and the date of the adjudicator’s decision in 2009.

Anrik argued that the court should assess any change in its financial position from the date of the ad-hoc adjudication agreement (in 2009), and not whether there had been a deterioration in its financial position from the date of the alleged contract in 2006. In Wimbledon Construction Company 2000 Limited v Derek Vago, HHJ Coulson QC (as he then was), held that even if it was probable that a party would not be able to repay the judgment sum if so ordered, the court should not usually make an order for a stay of execution where the financial position was the same or similar to its financial position at the date of the relevant contract. Anrik argued that the “relevant contract” for the purposes of the Wimbledon decision was the contract that gave rise to the judgment debt. Here, this was the ad-hoc adjudication agreement and not the alleged 2006 contract.

It was the date of the contract that mattered, but which contract?

The judge accepted Anrik’s submissions, holding that the “relevant contract” for the purposes of the Wimbledon decision was the contract that created the contractual mechanism giving rise to the judgment debt. Normally this would be the construction contract which, in most cases, would expressly provide a dispute resolution mechanism or be subject to the Construction Act 1996. Here, because of the underlying dispute, the parties had entered into an ad-hoc adjudication agreement and it was this agreement that created the contractual mechanism for the creation of the judgment debt.

The judge also held that there had been no change in the financial position of Anrik between the date of the ad-hoc adjudication agreement and the date of the hearing of AS’s application for a stay of execution. AS’s application was dismissed.

Is there a threshold test for granting a stay of execution?

Interestingly, both in argument and in his decision, the judge held (albeit obiter) that if he had been of the view that the adjudicator’s decision was unarguably correct then, in the exercise of his discretion, he would not have granted a stay of execution even if there had been a significant change in Anrik’s financial position between the date of the relevant contract and the date of the hearing.

Has this introduced a threshold test to be satisfied by an applicant for a stay of execution? If it has, then:

• No previous decision supports the imposition of such a test.
• It introduces a requirement in every case for the court to investigate the merits of the underlying dispute and correctness of the adjudicator’s decision. This would inevitably result in very protracted applications.
• It does not sit easily with the consistent decisions of the TCC and Court of Appeal, which support the proposition that the courts should simply enforce adjudicators’ decisions irrespective of whether the decision was right or wrong.

An update on this case also appears in issue 11 of the 4 Pump Court Construction Newsletter.