STAY OF ENFORCEMENT OF ADJUDICATION DETERMINATIONS & SETTING ASIDE FOR FRAUD
This short update touches briefly on the grounds for staying the enforcement of an adjudication determination, as well as a recent English decision where an adjudication decision was set aside on the basis of a properly arguable case of fraud.
Insolvent claimant. Since W Y Steel Construction Pte Ltd v Osko Pte Ltd [2013] 3 SLR 380 (“WY Steel”), the Singapore Courts have recognized that enforcement of adjudication determinations may be stayed where:
1. There is “clear and objective evidence” of the claimant’s insolvency; or
2. The court is satisfied that if the stay was not granted, money paid to the claimant would not ultimately be recovered if the dispute between the parties was finally resolved in the respondent’s favour.
The Singapore Court of Appeal in WY Steel also agreed with HHJ Coulson QC in Wimbledon Construction Company 2000 Limited v Derek Vago [2005] BLR 374 (“Wimbledon”), where HHJ Coulson QC held that two other relevant considerations are:
1. Was the claimant’s financial distress, to a significant degree, caused by the respondent’s failure to pay the adjudicated amount; and
2. Whether the claimant was already in a similar state of financial position (whether strength or weakness) when the parties enter into their contract.
Some of the cases that have applied WY Steel include United Integrated Services Pte Ltd v Civil Tec Pte Ltd and another [2019] SGHC 32, SH Design & Build Pte Ltd v BD Cranetech Pte Ltd [2018] SGHC 133, and FT Plumbing Construction Pte Ltd v Authentic Builder Pte Ltd and another matter [2018] SGHCR 3.
The Gosvenor case. The English Court of Appeal in Gosvenor London Ltd v Aygun Aluminium UK Ltd [2018] EWCA Civ 2695 has held that the approach in [26] Wimbledon is not an inflexible list, and affirmed the lower court’s decision in Gosvenor London Limited v Aygun Aluminium UK Limited [2018] EWHC 227 (TCC) to stay the execution of the judgment (granted on the adjudication award) on the basis 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”.
We note that in the Gosvenor decisions, it is suggested that granting a stay on the basis of risk of dissipation would:
1. Be an exceptional factual circumstance; and
2. Require a high test to be applied as to whether the evidence reached the standard necessary for the principle to apply, similar to those to justify the grant of Mareva relief.
Fraud. In the recent decision of PBS Energo AS v Bester Generacion UK Limited [2019] EWHC 996 (TCC) (“PBS v Bester”), Justice Pepperall declined to enforce an adjudication decision (by way of summary judgment) on the basis that the decision was arguably procured by fraud.
While affirming the prior decisions (including the first instance decision in Gosvenor) that where “… the alleged fraud has been adjudicated upon… the adjudicator’s decision should without more be enforced. So too, an adjudicator’s decision should usually be enforced where the defendant failed to take an allegation of fraud which should reasonably have been taken before the adjudicator” ([20] PBS v Bester), Justice Pepperall accepted that it was properly arguable on credible evidence (on the facts of PBS v Bester) that the adjudication decision had been procured by fraud, and that the respondent could not have discovered the fraud before the conclusion of the adjudication ([68] – [71] PBS v Bester).
It is interesting to note that in terms of timing:
1. The adjudication decision is dated 7 December 2018 ([1] PBS v Bester).
2. The documents relied upon was disclosed in a suit on 23 November 2018. It was stated that the respondent could only start reviewing on 5 December 2018. There were more than 57,000 documents disclosed, and some 17,000 documents were in Czech or Slovak disclosed without an English translation. ([57] – [58] PBS v Bester).
3. The claimant did not challenge the evidence in [57] – [58] PBS v Bester, but asserted that there were disclosure in a previous adjudication. However, the claimant did not assert that the documents now relied upon by the respondent were disclosed before 23 November 2018, nor did the claimant exhibit any other previously disclosed documents which could be used by the respondent to establish the facts that the respondent was relying upon ([60] PBS v Bester).
As such, even though the documents were disclosed before the adjudication decision was rendered, Justice Pepperall was satisfied that “Bester could not reasonably have been expected to argue its fraud allegation in the adjudication”.
Would PBS v Bester be followed in Singapore? We note that this approach may (potentially) be inconsistent with approach taken in s. 17 Building and Construction Industry Security of Payment (Amendment) Act 2018, which amends the current Building and Construction Industry Security of Payment Act to provide that a respondent may not commence proceedings to set aside an adjudication determination on a ground not included in the adjudication response, unless:
1. “the circumstances of the objection to support that ground only arose after the respondent lodged the adjudication response with the authorised nominating body”; or
2. “the respondent could not reasonably have known of those circumstances when lodging the adjudication response with the authorised nominating body.”
We observe that the approach taken in s. 17 Building and Construction Industry Security of Payment (Amendment) Act 2018 appears (prima facie) to be focused on whether the ground could have been included in the adjudication response. However, the approach in PBS v Bester appears to be tilted towards whether the ground could have been taken before the adjudicator.
However, it is beyond the scope of this update to deal with this issue, save to mention that any such discussion would have to address the principles of waiver and estoppel as set out in the Singapore Court of Appeal decision of Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd [2018] 1 SLR 317.
Tags: Construction; Adjudication; Building and Construction Industry Security of Payment Act; Building and Construction Industry Security of Payment (Amendment) Act 2018; Stay of Enforcement; Fraud
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.