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

IN THE HIGH COURT OF JUSTICE
TECHNOLOGY & CONSTRUCTION COURT

		Royal Courts of Justice Strand London WC2A 2LL
		13th October 2014

1. MR JUSTICE AKENHEAD: In these proceedings Miss Rokvic, who was the employer under a building contract, seeks the enforcement of two adjudication decisions in her favour in relation to work done by the defendant in relation to new mechanical electrical security and air conditioning systems at 8 Glasbury Road, London W14. There is no conflict but many years ago I lived at number 19 Glasbury Road, but that was a very long time ago. Essentially there have been three adjudications between the parties and in the first adjudication Peacock were the referring party and they secured a decision in their favour for £64,632.61, albeit they succeeded on the basis only that the sum, although due to them, did not take into account sums raised by the defendant as a set-off and counterclaim in respect of defects and the like, but in that first adjudication the adjudicator did decide that ultimately there was, or was likely to be, net sums due to the claimant. There was undoubtedly established by adjudication 1 a credit of just over £64,000 in favour of Peacock.
2. Two further adjudications were started shortly thereafter by Miss Rokvic against Peacock, Adjudication 2 relating to defective works and Adjudication 3 in respect of alleged delay in completing the works. In Adjudication 2 the adjudicator decided on 18 August 2014 that £138,596.29 plus interest was due to her and that the defendant should effectively be responsible for the adjudicator's fees. The decision in Adjudication 3, also on the same date, decided that £10,000 was payable by way of damages for delay by Peacock to Miss Rokvic. There was a requirement for payment also in respect of adjudicators' fees. Payment for Adjudication 2 and 3 sums was due on 26 August 2014 and, sensibly, correspondence was started between Holman Fenwick for Miss Rokvic and the defendant solicitors, who by this stage were Thomas Egger, and there was discussion between the solicitors as to the enforceability in relation to Adjudication 2. For instance, Thomas Egger in their letter of 9 September 2014 stated that they considered that the adjudication decisions in Adjudication 1 and 3 were enforceable but that Adjudication 2 was not enforceable. So an offer was made openly at that stage whereby Thomas Egger sought a net payment in their client's favour discounting Adjudication 2. It is clear that there were without prejudice discussions and it is right that I have not been informed in any detail about those and what was said and what was not said. What I am concerned with is open correspondence which followed on 22 September. Holman Fenwick in their first letter referred to the fact that by this stage on 17 September a sum of £63,291.34 had been received by them on account, and they invited the defendant, Peacock, to admit and pay the balance due to Miss Rokvic together with interest, saying this:

"Our client is forced to continue with these proceedings and obtain a judgment to enforce the adjudication decisions. We will apply for an order of indemnity costs against your client."

3. The second letter on that day was headed "Without prejudice save as to costs". I do not think it is being argued that this as such adds very much to the debate which we have had today. That is the mantra that is put in to protect the parties' position on costs so that if this matter had gone through to a hearing on the enforceability of the decisions and the claimant, Miss Rokvic, had succeeded and recovered more than this without prejudice save as to costs offer she would probably have had a good arguable case for indemnity costs. I am not going to set out in detail this letter, but the claimant solicitors say that they discussed a without prejudice offer and the on account payment of £63,000 odd and said that Miss Rokvic was similarly willing to seek to agree an overall settlement and to avoid further legal proceedings. They then say this:

"We accept that, based purely on the overall effect of the decisions in the adjudications number 1, 2 and 3 and the adjudicator's fees that have been paid to our client, the net amount due to our client was £107,183.71 excluding interest. Following Peacock's on account payment of £63,291.34 that net amount is reduced to £43,892.37. We confirm that if Peacock pays our client for the £43,892.37 our client will discontinue the court proceedings and will thereafter negotiate in good faith with a view to achieving overall settlement. However, unless and until that sum is paid by Peacock our instructions are to continue with court proceedings and obtain a judgment to enforce the full amount claimed with interest thereof."

4. Then there was a discussion on the second page of this letter about a possible overall settlement, but it is of interest that, in the table given there identifying seven heads of claim, there is nothing specifically referred to about the costs of this current litigation. There was a confirmation on the third page that the client, Miss Rokvic, would discontinue the court proceedings on receipt of balance of £43,892 due under adjudications number 1, 2 and 3, and thereafter Miss Rokvic was "willing to engage in further without prejudice negotiations with a view to reaching overall settlement which takes account of its unsatisfied heads of the claimant's entitlement indemnified by Peacock and the final account position." Again, there is no mention of costs there.
5. Thomas Egger replied on 23 September at 4:15pm saying that they had arranged for payment of £43,892.37 on account of Miss Rokvic to the Holman Fenwick account and I am told that that money was paid that afternoon; it must have been paid either by 4:15pm or by close of banking hours as such, but certainly I am told it was paid that day. The email letter goes on saying "the payment is made without admission of the enforceability of the decision in Adjudication 2". That is responded to on 24 September by Holman Fenwick, who acknowledged receipt of the £43,892.37 figure but raised the question of costs, saying that their client should be entitled to costs and that the costs were in the region of £15,000. Issue was taken on the same day saying, effectively, that a deal has been done in contractual terms and Peacock did not have to pay costs. Thus we arrived today at the issue between the parties as to whether or not, by one route or another, the claimant is entitled to its costs.
6. I am satisfied that there was a binding agreement judged objectively as between Holman Fenwick and Thomas Egger on behalf of their respective clients. The offer in the second letter of 22 September 2014 was, effectively, "if Peacock pays Miss Rokvic £43,892 our client will discontinue the court proceedings". That was the offer. It was capable of acceptance by conduct by payment: so to speak, if Thomas Egger had turned up with that amount in cash and placed it on Holman Fenwick's reception desk, that would have been acceptance by conduct. The letter of 22 August effectively is calling for payment as the method of acceptance, and the only question, therefore, which remains in terms of whether there was a binding agreement created by the payment is Thomas Egger's email letter of 23 September when it said that the payment was made without admission of the enforceability of the decision in adjudication 2. That said, it seems to me that there is little more than – as in many final and binding agreements – the fact that the payment is made without admission of liability. It does not add anything or take away anything from the settlement. The reality is, of course, it would prove commercially and probably legally impossible to challenge the enforceability of the decision in Adjudication 2, certainly insofar as it called for payments of identified express sums. I should say that I have been told that Adjudication 2 also provided for an indemnity in relation to certain defects, liability for which was found by the adjudicator in Adjudication 2 because costs had not yet been incurred. It seems to me that the question of enforceability of that indemnity remains in issue and it was never really part of Holman Fenwick's second letter of 2 September, nor indeed in the acceptance, so I do accept that that issue as to whether the un-quantified part of the adjudicator's decision in adjudication 2 of enforceability remains in issue.
7. So there is a binding agreement. But does that still leave open the question of costs? The offer of Holman Fenwick on behalf of their client was to "discontinue", and the effect of CPR Part 38 is that a claimant always, virtually, has an entitlement to discontinue. There are certain examples identified in the rule which say that discontinuance can only occur with leave of the court. This is not a case where permission is required because there is agreement, in effect, that there should be discontinuance and this is at a very early stage of proceedings. CPR 38.5 identifies that discontinuance takes effect on the day when notice of discontinuance is served. I am assuming that notice of discontinuance has not yet been served, but I need to consider the substantive issue on costs. CPR 38.5(3) says discontinuance "does not affect proceedings to deal with any question of costs." 38.6(1) says:

"Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant."

So the presumption is made, subject to the court's discretion, that the claimant remains liable for the defendant's costs, and that is wholly understandable, because when discontinuance occurs in many cases it is because the claimant is acknowledging that it does not have any or much of a case against the defendant, and therefore it is quite right and proper that there is such a presumption as such but that is a rebuttable presumption. It seems to me, however, that the offer that was accepted was on the basis that the claimant would discontinue. That must mean discontinuance in accordance with the rules; that leaves open the question of costs. This is a case where the default rule, in my view, simply does not apply as a matter of discretion because the claimant has succeeded through this settlement, which includes an obligation to discontinue, in recovering every penny in net terms which it was claiming from Adjudications 2 and 3. It has taken into account the sum due to the defendant, Peacock, in Adjudication 1, and that was a sensible commercial decision on the part of both parties; but it seems to me that Ms Rokvic had to commence these proceedings because the defendant was challenging the enforceability of the adjudicator's decsions and was challenging whether, even if Adjudication 3 was enforceable, Adjudication 2 was enforceable. By paying the whole net sum it was acknowledging, in effect, that Adjudication 2 was to be considered as enforceable at least in respect of the liquidated or specified sums were concerned.

8. It seems to me therefore that this is a case in which the claimant should, as a matter of discretion, be entitled to her costs of the proceedings. I ought to deal, but I will hear the parties, on her costs, which, I have to say, if I am to do a summary assessment, the sum of £17,000 seems to be a very large and, it might be said, disproportionate sum.
9. Sensibly, if I summarily assess the costs, the claimant has put in a bill of £17,426, but one needs to look at the clip of documents with which the court has been provided: a simple claim form, particulars of claim that refer to the two adjudications and seek their enforcement. It is clear that there were without prejudice discussions which went not only to the settlement of the adjudication issues but also to the substantive underlying disputes. In the claimant's solicitor's costs bill of £17,426 there is £11,000 for work on documents, and in seems to me inherently unlikely, or at least inherently unreasonable, that for a claim like this, which is settled relatively early, that £11,000 is anywhere near an appropriate or reasonable figure for the defendant to have to bear.
10. . I have suggested in argument that an appropriate amount would be nearer to £6,000. I am going to split the difference and say £5,500, which obviously includes the court fees and some time consulting with the client; it includes some of the correspondence between the parties which led to the settlement. I cannot see that work on documents would amount to more than £2,000 in terms of what is reasonable for the defendant to have to bear. I have been told, quite properly, that at least some of the extra costs may be attributable to the fact that, at least in part if not in full, a new legal team or legal personnel were deployed in respect of the enforcement from those who engaged in the adjudication; but it does not seem to me that that is a factor that should be held against the defendant. Bearing in mind that the claimant has succeeded today on an argument that was not expressly raised by the claimant and had not been floated by the defendant beforehand, it seems to me in those circumstances £5,500 inclusive of any VAT, which may not be applicable in any event, is an appropriately reasonable and fair figure and that should be payable within 14 days.