Grandlane Developments Ltd v Skymist Holdings Ltd [2019] EWHC 747 (TCC)

In Grandlane Developments, the TCC applied the decision in Gosvenor London v Aygun Aluminium but rejected a stay of execution on the basis that there was insufficient evidence to support a risk of dissipation.

Background

Grandlane provided development and project management services. It entered into a contract with Mrs Baturina to manage the development of property in Hampshire. In May 2016, the contract was novated to Skymist Holdings as employer.

As a result of Skymist’s dissatisfaction with Grandlane’s services, the contract was terminated in October 2017. Disputes then arose regarding Grandlane and its sub-consultants fees. This included invoices owed to architects of the project, PTP, which had been directly engaged by Grandlane.

The dispute was subsequently referred to adjudication where it was determined that the total due to Grandlane was £928,000.

The present case concerns Grandlane’s application to enforce the adjudication award and Skymist’s application to stay execution. During that application, Skymist raised suspicions that part of Grandlane’s award, the part of it that passed on as PTP’s fees, was fraudulent. It alleged collusion on the part of Grandlane and PTP that inflated the true value of the invoices due to PTP.

Decision

The TCC granted summary judgment in favour of the award. It found that there was insufficient evidence of fraud. The correspondence between Grandlane and PTP did not show clear and unambiguous evidence of fraud. Although there had been an increase in value of the claim in respect of PTP’s fees, this was due to a revised estimate of the construction cost which PTP’s fee was based on and it was not inflated by Grandlane.

Skymist’s application to adjourn the application, or alternatively to stay execution of summary judgment was also rejected. Adjournment was rejected as on the present evidence there was nothing which suggested that there was anything else that could be disclosed which would amount to clear and unambiguous evidence of fraud.

As for the stay of execution, principle (g) as set out in Gosvenor London Limited v Aygun Aluminium UK Limited [2018] EWCA Civ 269 applied. No stay of execution was justified on the facts here as there was no evidence that there was a real risk that Grandlane would organise its affairs to dissipate the adjudication sum so that it could not be repaid.

In her decision, Mrs Justice Jefford also clarified some basic points about principle (g):

• Test analogous to freezing injunction test in terms of evidence required.
• Dissipation of adjudication sum does not refer to the adjudication sum as the discrete sum of money awarded but, where the party has other assets, to the dissipation of an equivalent amount with the effect that the same sum cannot be repaid.
• Using the adjudication sum in the ordinary course of business is not an improper dissipation of the adjudication sum.

Comment

The result in Grandlane on stay of execution applies principle (g), which had previously been approved in the appeal of Gosvenor. It confirms that both parties and courts have begun to recognise fraud as a ground for justifying a stay of execution.

Unsurprisingly, however, Grandlane is also indicative of the difficulties required in satisfying principle (g). The case confirms that the test is a high one, and that strong evidence is needed in order to show that there is a real risk of dissipation. Coulson LJ’s freezing injunction test was applied here. There had to be a real risk, judged objectively, that a future judgment would not be met because of unjustifiable dissipation of assets.