England and Wales High Court (Technology and Construction Court) Decisions

In the High Court of Justice

In Chambers

Case Number: 1999 TCC 100

Date of Judgment: 15 March 1999

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An adjudicator was appointed to decide a dispute pursuant to section 108 of the Housing Grants, Construction and Regeneration Act 1996. Before doing so he decided that the scheme in Part I of the Schedule to the Scheme for Construction Contracts (England & Wales) Regulations, 1998 applied. On 12 February 1999 he made a decision that the defendant should pay the plaintiff approximately £16,000 and that the decision should be complied with peremptorily. Although requested to do so the defendant did not pay so on 8 March the plaintiff issued and served a writ for the amount due plus fixed costs and on 10 March issued and served a summons to abridge the time for acknowledging service of the writ and for taking other steps, including in relation to any application for summary judgment. The summons was returnable at 2 pm on 12 March. At 11 am on 12 March the defendant paid the amount claimed and the fixed costs stated on the writ. The plaintiff sought an assessment of costs that it had incurred. Held, any automatic stay of the action applicable under RSC Order 6, rule 2(1)(b) should be lifted, that the plaintiff was justified in issuing the summons to abridge time and was entitled to the costs in connexion with it but not to any costs relating to the writ. The costs were assessed summarily.

2. The facts are to be found in an affidavit of Michael Richard Draper, the plaintiff's solicitor, in its exhibit and in letters which were by consent presented to me. Some are drawn from the adjudicator's decision and since they may all be referred to an arbitrator to deal with the dispute, I mention them only for illustrative purposes. I am not of course required to make any finding about them and I do not do so. The plaintiff became a subcontractor to the defendant for groundworks and other enabling works at Borough Market Pavilions, Bedale Street, Southwark, pursuant to a order from the defendant of 18 September 1998 which incorporated the terms of DOM/1 (as modified by some General Conditions - according to the adjudicator's decision). The main contract works were supposedly complete at the end of October 1998. The dispute arose over the unpaid balance of the final account, which appears to have been agreed at £51,500 gross. The plaintiff claimed the unpaid balance of £12,212.50; the defendant maintained that it was not due as the work had not in fact been done properly. (I omit the full extent of the defendant's case.) On 21 December 1998 the plaintiff gave notice requiring adjudication and asked the Chartered Institute of Building to make an appointment. Its President appointed Mr Peter Talbot. The defendant said that the contractual scheme was applicable and that the dispute should be decided under the arrangements in the main contract. Mr Talbot decided that the contract did not comply fully with section 108 and he notified in the parties in letters of 8, 11, and 19 January 1999 that accordingly the Scheme in Part I of the Schedule to the Scheme for Construction Contracts (England & Wales) Regulations, 1998 applied (the Scheme). In his decision of 12 February 1999 the adjudicator rejected the defendant's case and decided that it should pay the plaintiff (a) the amount claimed within seven days of the date of the decision; (b) his fees and expenses of £1,597.30 and (c) the nomination fee of £150. Since the plaintiff paid (b) and (c) the total due to it was £16,096.98. Mr Talbot concluded by stating:

3. The plaintiff evidently then issued, on 15 February 1999, an invoice for £16,096.98. It gave the defendant the seven days (and more) to comply with the decision before its solicitors sent a fax on 26 February stating that unless payment was received by 2 March it intended to invoke paragraph 24 of the Scheme by obtaining summary judgment in accordance with Macob Civil Engineering Ltd v Morrison Construction Ltd, 12 February 1999, unreported (see paragraphs 33 -37 of the judgment of Dyson J). On the expiry of that period, on 2 March, the defendant replied by fax to the plaintiff's solicitors. Interestingly, the letter started with the statement "We are familiar with the "Macob" decision and its implications". It went on to say that it had given notice of arbitration, that the adjudicator had erred in a number of respects, including exceeding his powers, and to contend that, since the decision was in respect of a final payment, it was not due until 30 days after 19 February, ie 29 March, since the payment was governed by paragraph 5 of Part II of the Scheme.

4. On 8 March 1999 the plaintiff issued a writ claiming £16,096.98 plus interest at 8% from 20 February until 5 March and thereafter at £3.53 per day. As required by RSC Order 6, rule 2(1)(b) the writ stated "If, within the time for returning the Acknowledgement of Service, the Defendant pay the amount claimed and £89.25 for costs .... further proceedings will be stayed. The money must be paid to the Plaintiff or its Solicitors." On 10 March the plaintiff issued and served a summons returnable on 12 March (having obtained leave) for the following orders:

5. Mr Coplin for the plaintiff sought an order for costs on the basis that all the steps taken by the plaintiff were justified. Mr Chambers for the defendant submitted that no order for costs should be made in favour of the plaintiff defendant and that on one limb of his case the defendant was entitled to its costs. In summary he submitted, first, that with the payment of the full amounts claimed the action was stayed, as provided by the writ and by Order 6, rule 2(1)(b). Secondly, the plaintiff had stated on the writ that if the amount claimed were paid within 14 days the defendant's liability for costs would £89.25. It could not now go back on that representation and seek more costs. He also referred to Order 62, rule 7(3) which provides that the defendant is entitled to tax such costs even if they are paid in full as sought. This showed that the rules envisaged only a possible reduction in the fixed 14 day costs and not an increase. Thirdly, the summons was not justified. An order for the abridgment of time was rarely made: see the note to Order 3, rule 5 at paragraph 3/5/5 in the Supreme Court Practice, especially as regards shortening the period of 10 days allowed by Order 14, rule 2(3) for service of any Order 14 summons and affidavit in support. There was nothing in the HGCRA or in the Scheme which showed that Parliament intended that enforcement of an adjudicator's order should be effected more speedily than any other debt. If Parliament had so intended it would have changed the Rules. In addition the plaintiff had acted with undue haste in pushing the summons forward, especially having regard to the time that had ben taken beforehand. Fourthly, the defendant was entitled to its costs as the hearing was in the circumstances quite unnecessary as the money had been paid in the morning, in sufficient time to abandon the application. In reply Mr Coplin maintained that the intention of Parliament was clear: disputes were to be resolved by adjudication which was to be speedy and effective. There was therefore every reason to ask for abridgments and for the grant the court to exercise its discretion to grant them, otherwise Parliament's intention would be defeated. The stay did not affect the disposition of costs of applications launched before it took effect. The 14 day fixed costs did not mean that a plaintiff could not make an application and recover the costs if justified in doing so.

7. First, the automatic stay that applies by virtue of Order 6, rule 2(1)(b) does not in my judgment affect the court's jurisdiction to determine liability for the costs of an application issued before the stay applied. The purpose of this part of Order 6 is clearly to facilitate straightforward debt-collecting in a cost-effective manner. The defendant may apply under Order 62, rule 7(3) for a reduction in the costs taxed, but that is the only exception since the procedure assumes that all other costs are capable of being quantified by the plaintiff in advance (eg those for substituted service or service abroad). It presupposes that no other costs are going to be incurred. It does not in my judgment mean that if it is necessary to take some further action (eg to amend to claim an injunction and to seek it) the court cannot deal with the costs of that action simply because the amount claimed was subsequently paid. Once a writ is issued the defendant is liable for costs; he cannot avoid costs by paying before service - see the note to Order 13, rule 6. In any event the court may lift a stay and I have no doubt that if a defendant had incurred costs in relation to an application made before payment in full of the amount claimed plus the 14 day costs the court would lift any stay to hear that application. Here the summons was duly served before payment was made and in the circumstances of this case it would plainly be just to lift the stay in order to hear and decide the plaintiff's application.

8. Secondly, there can be no doubt that if the amounts claimed in writ are paid the plaintiff is not entitled to more than the costs claimed in the writ in respect of work done up its issue in relation to it. Order 6, rule 2(1)(b) read with Order 62, rule 7(3) makes this clear. Lifting the stay in order to deal with the cost of the summons does not let the plaintiff under that barrier. However the bulk of the costs claimed relate to the summons.

10. Next, ought they to be abridged in a case such as this? In principle in my judgment the answer is: yes. Action to enforce an adjudicator's decision is not comparable to the ordinary process of recovering an apparently undisputed debt. The Rules of the Supreme Court provide a reasonable time for the defendant in an ordinary case to take stock of its position in case there is a defence to the claim. The HGCRA (and the statutory instruments made under it) constitute a remarkable (and possibly unique) intervention in very carefully selected parts of the construction industry whereby the ordinary freedom of contract between commercial parties (without regard to bargaining power) to regulate their relationships has been overridden in a number of areas, one of which is dispute resolution. The overall intention of Parliament is clear: disputes are to go to adjudication and the decision of the adjudicator has to be complied with, pending final determination. There is no provision for a "stay of execution" (unless it is part of the decision itself), presumably since that would undermine the purpose which is finality, at least temporarily. In addition the provisions in the Scheme for the enforcement of peremptory orders via what is thought to be a quick and effective procedure reinforce the conclusion that Parliament intended that adjudicator's decisions and orders, if not complied with, were to be enforced without delay. It is clear that the purpose of the Act is that disputes are resolved quickly and effectively and then put to one side and revived, if at all, in litigation or arbitration, the hope being that the decision of the adjudicator might be accepted or form the basis of a compromise or might usefully inform the parties as to the possible reaction of the ultimate tribunal. Thus before a writ is issued to enforce the order of an adjudicator (whether or not declared to be a peremptory order) there will normally have been careful consideration of the underlying dispute, its ramifications and of the adjudicator's decision by all parties. The defendant's room for manoeuvre and its need for further time will be limited.

12. On the other hand it should not be thought that time will be abridged in every case, ie that it will always be sufficient simply to rely on the fact that an adjudicator has made a decision which not been complied with. For example, the plaintiff's affidavit (which was sworn for a summons on notice) did not refer to the defendant's answer of 2 March to the "letter before action" of 26 February. The letter of 2 March set out some apparently arguable grounds for not complying with the decision, eg that the adjudicator had exceeded his jurisdiction. In addition since the parties were not represented before the adjudicator (as the adjudication was conducted primarily on a "documents-only" basis), and since the letter might not have been written on legal advice, a party in the position of this defendant who needed to take legal advice might have been able to show that some of the quite tough abridgments proposed would be unjust to it (although in this case there would still probably have been some overall shortening of the minimum timetable set out in the Rules), had it been necessary to decide the point. The defendant's abandonment of the grounds advanced and its payment obviated that need.

13. The plaintiff was in my judgment justified in issuing its summons and pursuing it. That decision was vindicated by its upshot. The plaintiff was similarly entitled to seek an order for its costs and was not obliged to withdraw its application simply because the letter with the cheque had been delivered 4 hours earlier. I take into account the fact that necessarily the defendant may have to pay dearly for being a guinea pig, but I have also to take into account the fact that it would not have been necessary for either the writ or the summons to be issued had the defendant either complied with the adjudicator's order or taken pre-emptive action to have it set aside (if the grounds in its letter of 2 March were thought to be well-founded). As it is, the plaintiff got paid one month after the adjudicator's decision and three weeks later than that decision required and, if the defendant is unsuccessful in the arbitration, many months after the final account was agreed. Accordingly the plaintiff is entitled to the costs of its summons.

15. I am indebted to counsel for their careful, comprehensive and succinct submissions.