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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		14/02/2014

The Hon Mr Justice Stuart-Smith:

1. This judgment deals with issues of costs and other ancillary matters arising out of the hearing on 17 January 2014 of the application by the Claimant ["Devon"] for declarations relating to an adjudication. I gave judgment on the substantive application at the end of the hearing. In doing so I ordered that the Claimant should pay 70% of the Defendant's ["Celtic's"] costs of Devon's claim for declaratory relief but that Celtic should pay 100% of Devon's costs of an earlier injunction hearing. I directed the parties to exchange correspondence as to the net result of these costs order by 22 January 2014 and, if agreement was not reached, to make written submissions on costs by 27 January 2014.
2. The fact that the adjudication is the ninth (though, confusingly, referred to as "Adjudication 8") arising out of a contract between the parties by which Celtic agreed to design and construct an in-vessel composting facility in Devon did not augur well for the consensual resolution of ancillary orders, and the omens have proved to be correct. As a result, the following issues now have to be determined:

i) What costs are payable in either direction;

ii) Whether the hearing on 17 January 2014 resolved all issues raised by Devon's proceedings; and, if not,

iii) Whether any unresolved issues should be adjourned, dismissed or otherwise disposed of.

3. For the reasons set out below, I decide those issues as follows:

i) The net sum of £13,017 is payable by Devon to Celtic after setting off the costs due to Devon for the hearing on 20 December 2013 (£8,984) against the costs due to Celtic for the hearing on 17 January 2014 (£22,001);

ii) It would not be an abuse of the process for Devon to raise subsequently the issues that the Court did not address or decide on 17 January 2014 (for want of time) simply because they were included in Devon's Statements of Case in the present proceedings.

The Background Facts in A Little More Detail

4. It is common ground that Celtic is insolvent. It is enabled to pursue these proceedings as a result of a strange deed of assignment which gives Knowles Limited ["Knowles"] the right to receive all sums due to Celtic under the contract between the parties. I have not been asked to rule on the legitimacy of that arrangement and am not in a position to do so. The curiousness of the arrangement between Celtic and Knowles is increased by the fact that Knowles are representing Celtic and, as will be seen, charging for doing so, as well as providing an expert witness to act for Celtic.
5. By a Notice of Adjudication dated 6 December 2013, Celtic referred various matters to adjudication. When the Notice was issued, Celtic had failed to discharge the sum of just under £70,000 that was then due to Devon as a result of the previous adjudications, and had so failed despite numerous requests for payment. Devon took the view that the adjudicator did not have jurisdiction to decide the referred matters. Its first step was to issue an application on 18 December 2013 asking for three separate orders: an interim injunction restraining any further steps in the adjudication; an order for alternative service on "the Defendant's representatives Knowles Limited"; and an order abridging time for Celtic's Acknowledgement of Service. The proceedings themselves were issued on 19 December 2013 and claimed a declaration that the adjudicator had no jurisdiction and an injunction restraining Celtic from taking any further steps in the adjudication or issuing any further adjudication until it had discharged its existing liability under the previous ones.
6. The application was listed before Ramsey J on 20 December 2013. On 19 December 2013 Mr Rainsberry of Knowles sent a letter saying that Devon had never submitted an invoice and that, if it did so, it would be paid. This was a point that had never been taken before, but it was sufficient to persuade Ramsey J to adjourn the application for the interim injunction to enable Devon to issue an invoice, with liberty to restore. The invoice was issued and subsequently paid. Ramsey J also gave permission for the proceedings to be served by delivery to Knowles and gave directions to enable Devon's application for a declaration to be heard on 17 January 2014 with an estimated duration of 2 ½ hours. He reserved the question of costs of the application for the injunction and the directions that he had just given.
7. So it was that Devon's claim for a declaration came before me on 17 January 2014. By then, the application had managed to generate nine witness statements and just short of 2,200 pages of documentation. In her skeleton argument for the hearing, Counsel for Devon realistically recognised that the 2 ½ hours estimate was inadequate for determination of all of the issues that the parties had raised. Two issues in particular were not addressed during the hearing or in my judgment, namely Celtic's claims for interest and for the costs of a previous adjudication.

The Costs of the Application on 20 December 2013

8. Celtic takes a preliminary point that Devon failed to serve a Schedule of Costs 24 hours before the hearing on 20 December 2013. That is factually correct. In the run up to the hearing of 20 December 2013, no Schedule of Costs was served. Devon says that this was because Celtic was not engaging with the process and did not engage constructively other than to take the point that no invoice had been provided. In the event, a Schedule of Costs was served at 14.18 on 16 January 2014, fractionally late for the hearing the next day. At that hearing, Counsel for Devon mistakenly told the Court that the Schedule did not include Devon's costs for the hearing on 20 December 2013. It is not clear how that error occurred, though it may be partly explained by the fact that, in order to conclude the hearing, it was nearly 6 pm before judgment had been delivered and the question of costs arose. On 23 January 2014 Devon served a separate Schedule of Costs including only its costs of the hearing on 20 December 2014. Celtic has made detailed submissions on that Schedule which show that it has suffered no real disadvantage in dealing with the sums claimed.
9. On these facts, Celtic submits that Devon's costs of the hearing on 17 December 2013 should be disallowed entirely or significantly reduced. It relies upon CPR PD 44, at 9.5(4)(b) and 9.6 and relies upon Andrew Mitchell v Newsgroup Newspapers Ltd [2013] EWCA Civ 1537 at [40-42], a passage which is already so well known that it does not need to be set out again here.
10. The provisions of the Practice Direction upon which Celtic relies are intended to ensure that costs of short applications can be dealt with summarily and immediately after the hearing. That is why paragraph 9.6 says that the failure of a party, without reasonable excuse, to comply with paragraph 9.5 will be taken into account by the court in deciding what order to make about the costs of an application "and about the costs of any further hearing or detailed assessment hearing that may be necessary as a result of that failure." Here, it is at least questionable whether in the current climate, the fact (which I consider to be established) that Celtic was making no attempt to engage constructively with the process of Devon's application on 20 December 2013 other than to stave off the application for an interim injunction by belatedly calling for an invoice amounts to "reasonable excuse" for the purposes of paragraph 9.6. However, and on the assumption against Devon that it does not, when Devon's failure to comply with paragraph 9.5 is taken into account it can be seen that Celtic's submission has no merit at all other than its ability to identify the failure. The failure itself had no practical effect at all. Ramsey J reserved the question of costs, so there was no question of costs being assessed at the hearing. There is no suggestion that the absence of a Costs Schedule from Devon formed any part of his reasons for reserving costs. On the contrary, even in the absence of a substantive judgment, it is plain that the order reserving costs was a reaction to the fact that the reason why an interim injunction was not given was Knowles' letter on 19 December 2013 calling for an invoice – a move which, in my judgment, is fairly to be described as a "wheeze". The occasion for the issue of costs to be addressed was the hearing on 17 January 2014, by which time a schedule including the costs of the hearing on 20 December 2013 had been submitted: the fact that it was sent 18 minutes late on 16 January 2014 is trivial and to be ignored.
11. Accordingly, while taking Devon's failure into account as directed by paragraph 9.6, I also take into account Celtic's conduct, the substantive irrelevance of the failure, and the complete absence of any disadvantage to Celtic. In the circumstances of this case I decline to make any deduction from the costs that would otherwise be ordered to be paid by Celtic in respect of Devon's injunction application on 20 December 2013.
12. Devon claims £11,682 exclusive of VAT, which it can recover. Celtic offers £8,000 and takes the following points:

i) 1.3 hours is said to be excessive for attendances on opponents, which is said to comprise two letters. The second was only necessary because the first was ignored. The objection is not shown to be well founded.

ii) Attendances on others: 5.1 hours is said to be excessive. Devon responds that the time includes provision for dealing with the interim injunction and the successful application for alternative service of proceedings in circumstances where no engagement or cooperation from Celtic or Knowles was forthcoming. The objection is not shown to be well founded.

iii) Time spent on documents: Mr Willis' first statement was a substantial document and was necessary to sustain Devon's interim application. Celtic has not identified any part of the document that was unnecessary. Since it was prepared in the early stages of the proceedings and was likely to be critical in persuading the Court to make any order on the interim application, I can understand the need for thoroughness in its preparation and the time claimed appears reasonable. It is not clear how preparation of the Application (2 pages) and orders can have taken 3.1 hours. I allow 2 hours, leading to a reduction of £198.

iv) Attendance at hearing: Devon claims 1 hour for the hearing itself and 5 hours travel. That was necessitated by the urgency of the application shortly before Christmas. It was reasonable to bring the proceedings in London after making enquiries about which court could hear the application. The objection is not shown to be well founded.

v) Counsel's fees: £5,500 is claimed for a one hour hearing by Junior Counsel called in 2001. The material before the Court was one substantial witness statement and the notice of application. I am unable to understand how the preparation could have taken more than one full day, in addition to the hearing itself. I do not know Counsel's hourly charging rate but, assuming it is within reasonable bounds, a reasonable fee would be not more than £3,000. I therefore reduce the sum claimed by £2,500.

13. I therefore reduce the sum claimed by £2,698 and award costs in the sum of £8,984.

The Costs of the Application on 17 January 2014

14. Celtic claims £62,181, which includes £10,620 for solicitors' fees, £18,000 for Counsel's fees (split as £7,300 for advice/conference/documents and £10,700 for the hearing) and £33,561 for Knowles' fees.
15. As a preliminary point Devon submits that if Knowles, a firm of claims consultants, carries out work which could reasonably have been carried out by a solicitor it is wrong in principle for more to be allowed than would have been allowed if it had been done by solicitors. Here, the work done by solicitors for Celtic was done by a Grade A solicitor and Partner in Celtic's Solicitors, who charged £225 per hour. The majority of the substantial amounts of work done by Knowles was done by Mr Rainsberry, who has charged £390 per hour, and Mr Wicks, who has charged £290 per hour. Celtic says that these are rates that could have been charged by Grade A and B solicitors practising in the London 1 area, and that their involvement was such as to enable the work to be done in fewer hours than it would have taken solicitors.
16. On the point of principle, I am in no doubt that Devon is right: see NAP Anglia Ltd v Sun-Land Development Co Ltd (No 2) [2012] EWHC 51 (TCC) at [24] per Edwards-Stuart J, with whom I respectfully agree. It is irrelevant that the rates claimed for Knowles are rates which may be recovered when work is done by some solicitors in London. First, Knowles are not qualified solicitors practising in London. Second, Celtic's solicitors are not based in London. Third, it is not obvious that the work done by Mr Rainsberry and Mr Wicks was work that required to be done by a Grade A solicitor: see below. Fourth, Celtic has provided no information to justify the hourly rates charged, either by reference to qualifications or otherwise. For the purposes of this ruling, the best guide to the hourly rate that would be chargeable for a Grade A solicitor's work for Celtic is the rate of £225 being charged by Celtic's solicitor in this case. Devon's solicitors charge Devon either £200 or £180, depending on the identity of the fee earner. On this material I see no justification for charging more than £225 per hour for Mr Rainsberry and £180 for Mr Wicks.
17. I start with a consideration of proportionality: to my mind, to incur costs in excess of £60,000 for a 2 ½ hour application such as this is clearly disproportionate by a significant margin, even allowing for the fact that the hearing eventually took just under 4 hours. I accept that the Court required to be informed about the previous history of adjudications and arbitrations between the parties; but I do not accept that it required over 28 hours of solicitors' time and over 100 hours of Knowles' time (or anything like it) to prepare Celtic's case for the hearing. Celtic's three statements amounted to 43 pages (Mr Wicks – 10; Dr Walsh – 12; Mr Rainsberry – 19), significant chunks of which consisted of quotations from documents that were also annexed. While I do not criticise the extent of the citations as such, they provide substantial "padding" that needs to be taken into account when considering the amount of work that was required to prepare the documents. I return to the question of Knowles' fees below.
18. Devon takes 25 separate objections to Celtic's statement of costs. It is a disproportionate use of time and resources to deal with each one seriatim. I make the following findings:

i) The solicitors' times for personal attendances on Celtic, letters out and emails and attendance on (and letters to) others all appear to be excessive. 21.5 hours is claimed, which I reduce by 8 hours, or £1,800.

ii) For working on documents the Solicitors claim 4.3 hours for checking amending and redrafting the three witness statements for Celtic. That is not of itself unreasonable but I bear it in mind when considering the sums claimed for Knowles in preparing those same documents.

iii) Time has been charged for Knowles employees (Buffam and Murray) whose job is not described and in circumstances where the work done appears to be secretarial or other work that would normally be regarded as overheads and included in solicitors' fee-earners' hourly charges. I see no justification for any of those charges. I make a reduction of £745 in respect of these claims.

iv) A further employee (Dickinson) is charged at £190 per hour. Her work includes "Research for [Mr Rainsberry's] witness statement" and "collation of exhibits" and "reviewing time and tasks on Celtic for KM cost application … check through calcs." It is not obvious that these should be regarded as separate heads of costs or how a rate of £190 per hour is to be justified. Against a claim for £1,178, I allow £250 for 2.2 hours of research, a reduction of £928.

v) All entries for Mr Rainsberry up to 23 December 2013 appear to be related to the injunction application and reviewing the order of 20 December 2013. None of these charges are recoverable as costs of the hearing on 17 January 2014. I make a reduction of £6,903 in respect of these items.

vi) In the period from 30 December 2013 to 16 January 2014 Mr Rainsberry charges 40 hours including 15.5 hours for drafting his witness statement and assisting with others. During the same period Mr Wicks charges 31.5 hours, including 13 hours (plus part of a further 7.5 hours) drafting his witness statement. Having reviewed all the entries (and taking into account the parallel involvement of solicitors as allowed above) I would allow approximately 25 hours for Mr Rainsberry and 20 hours for Mr Wicks. Against the sum claimed of £24,500 ((40 x 390) + 31.5 x 290)) I therefore allow £10,125, a reduction of £14,375. This reduction is based on allowing the specified hours at notional Grade A solicitor rates. That is, if anything, generous to Celtic since it is not evident that all of the work would justify being done by a solicitor of that grade.

vii) Subject to correction of my calculation, it follows that I make a reduction of £22,951 against the claim for Knowles' fees of £33,561 and a reduction of £1,800 against the solicitors' fees claim of £10,060.

viii) Celtic was represented by Junior Counsel called in 2001. It is plain that she gave detailed advice before her brief fee was incurred. She must therefore have been familiar with the issues when the time came to prepare for what was listed as a 2 ½ hour application. Once again, I do not know her hourly rate or precisely how her fee for the hearing was calculated. Her skeleton argument and presentation were very competent (as were those of counsel for Devon) but I am unable to understand how either £10,700 as a brief fee or £18,000 for her involvement overall can possibly be justified. On the assumption that her involvement may reasonably have taken four full days, or thereabouts, I allow £12,000 – a reduction of £6,000.

19. Adopting these itemised reductions leads to the conclusion that Celtic's claim (on 100% basis) of £62,181.50 falls to be reduced by £30,751 to £31,430. Standing back, that can be said to be a proportionate sum when taking an overall view of the importance and complexity of this application. 70% of that sum is £22,001.

The Net Result

20. Setting off the sums due to Devon for the hearing on 20 December 2013 against those due to Celtic for the hearing on 17 January 2014 produces a net liability from Devon to Celtic of £(22,001 – 8,984) = £13,017.

What Issues Were Resolved on 17 January 2014?

21. I have said that not all issues raised by Devon in the proceedings were resolved on 17 January 2014. Celtic submits that those issues that were not decided by the Court should be treated as dismissed and that it would be an abuse of the process for Devon to raise them again in the future, relying upon the statement of principle by Wigram VC in Henderson v Henderson (1843) 3 Hare 100, 114. Put shortly, Celtic submits that the unresolved issues not merely could and should have been raised in the present proceedings but that they were raised and that therefore it would be an abuse of the process to raise them again in the future because "the Court has been asked to hear, has heard, and has disposed of, the whole of [Devon's] claim."
22. I disagree. The Court heard and resolved those issues for which there was time on 17 January 2014. The fact that other issues that arose on the face of Devon's Statements of Case were not raised or resolved was attributable to a sensible use of the resources of the Court and the parties. It would have been possible for Devon to have applied for the balance of its applications to be adjourned for resolution at a later date; but had it done so I would have refused the application. That is because, in the light of my determination that the adjudicator had jurisdiction to deal with the bulk of the matters referred to him, the sensible course (in my view) would be and was to let him get on with it. If subsequently there were real issues that arose and had not been resolved, then (and only then) it would be a sensible use of the Court's time and the parties' money to raise those issues for determination. I therefore reject the submission that it would be an abuse of the process for issues that were not addressed or resolved by the Court's judgment on that occasion to be raised, if appropriate, at a later date simply because they were raised on the face of the proceedings.
23. I would therefore adopt Devon's draft form of order save that paragraph 2 should read as follows: "Subject and without prejudice to paragraph 3 below, the Adjudicator has jurisdiction in relation to the money claim/final assessment referred by the Defendant in its Notice of Adjudication dated 6 December 2013." A new paragraph 3 should be inserted (and subsequent paragraphs adjusted accordingly) as follows: "The Court has not determined whether or not the Adjudicator has jurisdiction in relation to (1) the Defendant's claim for statutory interest and/or (2) the Defendant's claim for its costs of Adjudication 7 as damages." An order in those terms, taken with the terms of the judgment, should make the position clear for the future.