| Date | 31 August 2005 |
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| Judgment | John Roberts Architects Ltd v Parkcare Homes (No 2) Ltd, TCC 25 July 2005 |
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| The Issue | Payment of parties' costs in the event of a discontinued adjudication. |
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| Implication |
The
parties' adjudication costs are not recoverable except to the extent
that the parties expressly agree. Where that agreement is for the
payment of costs "as part of the adjudicator's decision", the adjudicator
will have no jurisdiction to award costs if the adjudication is abandoned. |
printNeither the 1996 Construction Act nor the Scheme for Construction Contracts, which contains model terms for adjudication, provide for the payment of the costs incurred by either party in prosecuting or defending claims made in adjudication. Parliament clearly did not think it essential for adjudication agreements to provide for the recovery of the parties' costs. Nevertheless, since the statute is silent upon the matter, it remains open to the parties to agree within their contract that in the event of adjudication, the adjudicator will have the power to decide who should pay the parties' costs. Despite this, few of the standard forms of construction contract empower the adjudicator to deal with the parties' adjudication costs. It is in the non-standard amendments to contracts that reference to the parties' adjudication costs is frequently found. Indeed, these clauses often go further than a simple provision that the adjudicator shall have a discretion to decide who should pay the parties' costs and provide, for example, that the referring party must pay the costs of the adjudication, win or lose. Such clauses are currently the subject of consultation with the Government and it is likely they will eventually be outlawed. The recent case of John Roberts Architects v Parkcare Homes examined the situation where the referring party had discontinued the adjudication proceedings and in consequence the respondent claimed its abortive costs in defending the case made against it in the adjudication. Roberts had been engaged by Parkcare to provide architectural services in connection with building works to be carried out at their premises in Salford. The contract between the parties was based upon the RIBA Conditions of Engagement for the Appointment of an Architect. These conditions provided for adjudication, but clause 29 had been amended to the effect that "the adjudicator may in his discretion direct the payment of legal costs and expenses of one party by another as part of his decision". Disputes arose between the parties and on 11 May 2004, Parkcare sent a letter to Roberts claiming a sum in excess of £1.3 million in respect of alleged failings in the standard of service provided by Roberts. The letter required a response within seven days failing which the matter would be referred to adjudication. Over the next three weeks Parkcare made two attempts to commence adjudication. On both occasions Parkcare was forced to accept the point that the adjudicator did not have jurisdiction since a dispute had not yet arisen. The adjudications were discontinued and the adjudicator invited to submit his account to Parkcare for time expended on the matter which Parkcare paid. This however was not the end of the matter as far as Roberts were concerned. They had expended some £87,000 in dealing with the aborted adjudication and unsurprisingly asked the adjudicator to direct that Parkcare should pay those costs. In addition, Roberts asked the adjudicator for a formal order that the claim be dismissed, no doubt fearful that a third adjudication was waiting in the wings. The adjudicator took counsel's opinion and decided that, although he did not have jurisdiction to order that the substantive claim be dismissed, he did have jurisdiction to make an award of costs. He ordered Parkcare to pay Roberts £87,000 plus VAT. Parkcare refused to pay and the matter came before the Technology and Construction Court in London. Roberts argued that the agreement empowered the adjudicator to award costs. In consequence, the parties to the agreement could not be taken to have intended that the referring party could discontinue an adjudication, perhaps just before the giving of a decision which the party believed would be against him, thereby leaving the other party without any remedy for the recovery of its costs. The abandonment of the claim did not remove the jurisdiction of the adjudicator to decide the dispute or to make an award of costs. His Honour Judge Richard Havery QC disagreed. It was only as part of his decision on the substantive issues that the adjudicator could direct the payment of legal costs. That was the clear meaning of the amended clause in the agreement between the parties. Since the adjudicator did not make a decision on the matters set out in the notice of adjudication, he had no jurisdiction to decide the parties' liability for costs. Moreover, it was inappropriate to imply a term in the contract to the effect that the adjudicator should have the power to deal with the parties costs in such a situation. It was not necessary in order to give 'business efficacy' to the contract and neither could the term be implied because it represented the obvious intention of the parties. In consequence, Roberts' claim for costs of the discontinued adjudication proceedings was dismissed.
CJ-0534
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