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In adjudication enforcement proceedings, can a party recover the costs of using a claims consultant?

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13/01/2017

Octoesse LLP v Trak Special Projects Limited [2016] EWHC 3180 (TCC)

The Technology and Construction Cout (“TCC“) has confirmed that the costs of engaging a claims consultant can be recovered in adjudication enforcement proceedings, but only if those costs relate to activities which would not usually be carried out by a solicitor (such as specialist expert work).

Costs such as instructing counsel, liaising with the Court, and drafting a schedule of costs will not be recoverable (or will be substantially reduced) because these activities fall within a solicitor’s usual scope.

Background

  • Octoesse LLP (“Octoesse“) engaged Trak Special Projects Ltd (“Trak“) as main contractor for the construction of mixed residential and retail units in London under a contract dated 27 November 2013. The date for completion was 29 September 2014
  • completion of the works was delayed. The Contract Administrator issued a certificate of non completion on 3 October 2014. Practical completion was achieved on 13 February 2015. Trak was granted a 9.5 week extension of time in February 2015. No further certificate of non completion was issued
  • on 4 May 2016, Trak make an application for final payment. Octoesse issued a pay less notice deducting liquidated damages
  • Trak commenced adjudication proceedings claiming that the pay less notice was not valid because (Trak argued) Octoesse did not have a right to deduct liquidated damages
  • the adjudicator agreed with Trak and ordered that Octoesse make payment to Trak of the sums applied for
  • the adjudicator’s decision turned on the proper construction of clauses 2.22 and 2.23 of the contract which related to certificates of non completion and the deduction of liquidated damages
  • Octoesse did not make payment and instead commenced Part 8 proceedings in the TCC seeking declarations as to the proper construction of the contract.

The Contract

The Contract was in the form of the JCT Intermediate Building Contract 2011 with bespoke amendments. Clause 2.22 and 2.23 of the JCT were unamended from the standard form.

Clause 2.22 provided that:

  • if the Contractor fails to complete the Works or a Section by the relevant Completion Date
  • the Architect/Contract Administrator shall issue a non-completion certificate
  • if an extension of time is made after the issue of the non-completion certificate then
  • the extension or time shall cancel the non-completion certificate and
  • the Architect/Contract Administrator shall issue a further certificate.

Clause 2.23 provided that:

  • if the Architect/Contract Administrator has issued a non completion certificate under clause 2.22 and
  • the Employer has notified the Contractor before the date of the Final Certificate that he may require payment of liquidated damages; then
  • the Employer may not later than 5 days before the final date for payment give notice to the Contractor that the Contractor is required to pay liquidated damages.

The Court’s Decision

The Court considered that under clause 2.22 if an extension of time is issued after the date of a non-completion certificate, then the extension of time cancels the non-completion certificate, and liquidated damages can only be deducted if a further non-completion certificate is issued to reflect the extension of time.

Octoesse therefore could not rely upon the non-completion certificate issued in October because this certificate had been cancelled by the later extension of time.

The Court therefore agreed with the adjudicator’s finding that the pay less notice was not valid and ordered payment by Octoesse of the sums awarded by the adjudicator.

Costs

Rather than engaging solicitors, Trak had instructed claims consultants to assist it in the court enforcement proceedings. If a party does not engage solicitors, they are regarded by the Court as a ‘litigant in person.’

Octoesse argued that Trak should not be entitled to recover the costs of these claims consultants as part of the court proceedings.

Octoesse relied upon a previous Court of Appeal decision which stated that a litigant in person can recover costs for the same categories of work and disbursement which would have been allowed if the work had been done or the disbursements had been made by a legal representative on the litigant in person’s behalf.

Octoesse argued that this meant that claims consultants’ costs were not recoverable as they are neither work done by the litigant in person nor a disbursement which would have been allowed if made by a legal representative.

The Court confirmed the following principles:

  • where a litigant in person seeks to recover the costs of a consultant’s assistance, the relevant question is whether, in the particular instance, the consultant’s costs are recoverable as a disbursement
  • that question is answered by considering whether those costs would have been recoverable as a disbursement if they had been made by a solicitor
  • costs would be recoverable as a disbursement by solicitors if the work is such as would not normally be done by solicitors
  • but there may nonetheless be specialist assistance the cost of which would be recoverable.

It is this area of specialist assistance where there is a difficult dividing line between what is and is not recoverable.

The Court found that in adjudication, parties are often represented by claims consultants or other consultants. Where enforcement proceedings are brought, the grounds for resisting enforcement are often founded on issues such as jurisdictional challenges or breach of natural justice arguments relating to the conduct of the adjudication. Even if solicitors are instructed on the enforcement proceedings, it would therefore be common practice, and in many cases necessary for them to seek assistance of the consultants involved in the adjudication. This is particularly true given the short timetable of adjudication enforcement proceedings because a newly instructed solicitor will not have time to review all of the previous correspondence in respect of the matter, and will instead need to be guided by the claims consultant who has the background knowledge to the dispute.

The Court therefore confirmed that costs incurred by claims consultants assisting a solicitor or a litigant in person will usually be recoverable in adjudication enforcement proceedings, if the same consultants have represented the party in the adjudication.

However the Court did not allow Trak to recover the costs claimed for those activities carried out by the claims consultants which would usually be carried out by solicitors such as some of the costs of instructing Counsel, liaising with the Court and preparing a schedule of costs.

Comment

Contract Administrator’s should take note of the requirement to issue a fresh non-completion certificate if a later extension of time is issued.

The safest option to ensure that legal costs will be recoverable in adjudication enforcement proceedings is to engage solicitors. If a party chooses not to engage a solicitor then, to increase the likelihood of costs being recoverable, all work which usually fall within a solicitor’s scope should be carried out by the party’s in house team, and not passed to claims consultants.

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