Croudace Homes LTD v PRB Wiring Solutions LTD

In Croudace Homes LTD v PRB Wiring Solutions LTD (Technology and Construction Court, Alexander Nissen QC, 14 July 2020) the contractor was liable to reimburse the developer for the fees it paid to the adjudicator pursuant to the adjudicator's decision that the developer was to pay his fees and was to reclaim them from the contractor despite the challenge to their reasonableness.

The adjudicator decided that the contractor was liable for all his fees and expenses and directed that the developer should pay his fees and expenses and reclaim that sum back from the contractor.

Alexander Nissen QC in rejecting the contractor's challenge to the reasonableness of the adjudicator's fees held that it was not open to the contractor to challenge the fees charged. It was in effect not now open to the contractor to challenge the reasonableness of the fees since no effective action was taken. There was no evidence before the court that the contractor challenged the reasonableness of the fees of the adjudicator before the developer paid them. It was therefore both simply too late and inappropriate to raise issues as to quantum in circumstances where the sum has already been paid to the adjudicator. The contractor should have raised objection to the fees before they were paid.

The judge went on to hold that the basis on which the contractor sought to challenge the fees was in any event flawed. The contractor relied on the disparity of the charges with the charges made by another adjudicator in the separate adjudication between the parties in respect of another project. There is no reason to suppose that different adjudicators will charge the same amount for performing the same adjudication, let alone a different adjudication on a different project with a differently qualified adjudicator. The fact that a particular length of time or a particular hourly rate was charged by an adjudicator in a different adjudication does lend any assistance to the question of whether this adjudicator spent too many hours working on this adjudication or charged too much for doing so. There is no reasonable basis upon which it could be said that the fees were too high even if it were open to the contractor to take this point. The liability existed in respect of the fees and it was not open to the contractor to challenge the amount.

The full text of the judgement of Alexander Nissen

This is an adjudication enforcement hearing to enforce the decision of an adjudicator, Mr Alway, dated 29 April 2020. The dispute relates to a project at Tetsworth, Mount Hill Farm. The claimant is a developer. The defendant is an electrical contractor.

The provisions of the contract between the parties are agreed to contain standard terms which include, at clause 16.4, a clause that allows the company (that is the claimant in this case) to terminate the employment of the contractor at any time, on notice, and that, in those circumstances, the company would not be liable for any loss and damage resulting from that termination. The standard terms also included provision for adjudication, with any such adjudication being subject to the Scheme for Construction Contracts. The adjudicator is to be appointed by the RICS.

The claimant, Croudace, started an adjudication by referral dated 3 April 2020, seeking declaratory relief from the defendant in respect of the Tetsworth project, that it was entitled to terminate the contract pursuant to clause 16.4 and that there was no liability on its part in respect of loss and damage flowing from that termination. The decision was issued by the appointed adjudicator, Mr Always, on 29 April 2020. He concluded, at para.79 of his decision, that Croudace was entitled to and did validly and lawfully terminate the contract pursuant to its rights under clause 16.4. He declared that:

Following the lawful termination, Croudace has no liability to PRB for any loss and damage arising.

At para.81 he decided that:

PRB is liable for 100 percent of my fees and expenses, being £10,850 plus VAT of £2,170, giving a total of £13,020.

He directed that Croudace should pay his fees and expenses in that amount, in the first instance, and reclaim that sum back from PRB. He noted, incidentally, at para.30 of his decision that any other contracts, including the Didcot contract, were not relevant to the adjudication.

The evidence is that the claimant paid the fees to the adjudicator, as directed by him in para.81, on 5 May and I have seen evidence that the adjudicator confirmed receipt thereof. The claimant seeks summary enforcement in order to claim reimbursement of those fees which the claimant has paid although it would also provide judicial confirmation that the declarations therein set out have a binding effect upon the defendant until final determination of the dispute in arbitration or litigation. Mr Smith relies on the provisions in the Scheme for Construction Contracts which, at para.23, makes clear that the decision of the adjudicator is binding on the parties and must be complied with. In his skeleton argument he relies on the well-known dicta in Carillion Construction Limited v Devonport Royal Dockyard Limited [2005] EWHC 778 to the effect that adjudicators' decisions are there to be complied with. That case identifies the very limited grounds upon which a challenge to a decision may be made.

In answer to the claim, Mr Boulton (representing the company) has really raised three points. He fully accepts, to use his own words, the liability of the defendant to reimburse the fees paid to Mr Alway, but he does seek to challenge, in these proceedings, the amount and/or the value that was derived from what Mr Alway did, and so there is, in effect, a challenge to the quantification of those fees.

Secondly, Mr Boulton relies on a subsequent decision of an adjudicator - a different adjudicator on a different project - Mr Collie, in respect of the Didcot project. He relies on the existence of that decision as justification for seeking an adjournment (as he expressed it) or stay of execution of the judgment that would otherwise be payable. Mr Collie was asked to decide the same issues as Mr Alway, but in respect of Didcot, and he reached different conclusions on them.

Lastly, Mr Boulton relies on the fact that there were two sites on which the defendant worked and, viewed in the round, these two sites could have been brought under the same adjudication and would therefore have resulted in a single, different outcome, namely the one decided by Mr Collie. He notes that the letter sent before these proceedings by Gateley, solicitors for the claimant, misdescribes the claim form as including a reference to both sites.

Dealing firstly with the quantification point, Mr Smith on behalf of the claimant says that this point is not even open to the defendant to take. He relies on Fenice Investments Inc. v Jerram Falkus Construction Limited [2011] EWHC 1678 (Fenice) where HHJ Waksman QC analysed the position in circumstances where one party had paid an adjudicator's fees and sought reimbursement of them. He said:

"[37]  Given the principles set out above, the party to an adjudication which is considering a fees challenge will need to give careful consideration as to whether there is any realistic basis for disputing the fees claimed. It is to be expected that that in the usual run of cases there will not. But if a party, and in particular the paying party, intends to challenge them, it should take the initiative where necessary. If the adjudicator brings proceedings first, the party sued will then defend in the usual way. But if the adjudicator does not, or threatens proceedings against the other party (who may take a different view on fees) the paying party should progress the resolution of the dispute by seeking a declaration from the Court as to the reasonableness of the fees. In any such proceedings the adjudicator will no doubt counterclaim for the fees. If the adjudicator has by then claimed against the non-paying party or now seeks to bring him in, that party would be able, properly, not to admit liability on the basis of the dispute raised by the paying party. It is hard to see how the adjudicator would be able to obtain an immediate judgment against the non-paying party in such circumstances. The latter will be bound by the eventual result. In this way the non-paying party's exposure to costs will be kept to a minimum."

[42]  Mr Webb contends that under the second characterisation of the claim JFC was clearly in breach of its obligation to pay because on any view the reasonable fees exceeded £5,000. The consequence was HI's pursuit of Fenice and in order to forestall litigation which could not be defended Fenice acted reasonably by paying the fee and Glovers' costs. Mr Webb contends that even if hereafter it could be shown that a reasonable fee was less than £19,775 this matters not, provided that Fenice acted reasonably in considering that it was. In other words not only is there a band of reasonableness for the fees but also a band of reasonableness in terms of Fenice's actions. In short, its position should be considered as analogous to the Claimant buyer in Biggin v Permanite [1951] 1 KB 422 who was able to recover as against the seller of the defective goods, the cost of the settlement reasonably made with the sub-buyer. Moreover, on the reasonableness of Fenice's action, JFC would bear the burden of disproving it. That raises at least the theoretical possibility that as against JFC, Fenice can recover a sum which is more than was in fact due to Dr Mastrandrea on the basis of a reasonable fee. As a matter of law that proposition appears to be sound. In fact, for the reasons set out below, the outcome in relation to Dr Mastrandrea's fees will be the same, however Fenice's claim is to be characterised. But a paying party can in any event avoid a Biggin v Permanite type claim by the other party by swiftly taking the initiative as described above.

I am satisfied that the dicta in that case applies here and it is, in effect, not now open to the defendant in these proceedings to challenge the reasonableness of the fees since no effective action was taken.

The position, actually, is that there is no evidence before the court that the defendant challenged the reasonableness of the fees of the adjudicator before the claimant paid them and, therefore, it is both simply too late and inappropriate, in these proceedings, to raise issues as to quantum in circumstances where the sum has already been paid to the adjudicator. The defendant should have raised objection to the fees before they were paid by the claimant.

In any event, I am satisfied that the basis upon which Mr Boulton would seek to criticise the fees, were he allowed to do so, is itself a flawed basis. Mr Boulton relies on the disparity of the charges made by Mr Alway with the charges made by Mr Collie in the separate adjudication in respect of Didcot.

HHJ Waksman QC said this in Fenice:

[35]  Accordingly, in relation to hourly rates, provided that the rate claimed is not clearly outside an overall band of reasonableness, there will be no basis to interfere, even if it could be shown that a different adjudicator, especially an adjudicator with different qualifications, may have charged less or even significantly less. In this area, as with solicitors' costs, it is a fact that rates can vary considerably. The seniority and experience of the adjudicator concerned is also a factor. The reasonableness of an hourly rate is not to be determined in a vacuum, in absolute terms, by reference to some notional adjudicator.

Thus, there is no reason to suppose that different adjudicators will charge the same amount for performing the same adjudication let alone a different adjudication on a different project with a differently qualified adjudicator. The fact that a particular length of time or a particular hourly rate was charged by an adjudicator in a different adjudication does lend any assistance to the question of whether this adjudicator, Mr Alway, spent too many hours working on this adjudication or charged too much for doing so.

Given the limited material that there is before the court, I am not satisfied that there is any reasonable basis upon which it could be said that Mr Alway's fees were too high even if it were open to the defendant to take this point, which, in my judgment, it is not. In those circumstances, it seems clear that the liability exists in respect of the fees and it is not open to the defendant to challenge the amount.

I now turn to Mr Boulton's third point next, which is the fact that these two adjudications were dealt with separately in circumstances where he says they should not have been. The position in law is perfectly clear that, without consent of the parties, it is only possible to bring an adjudication in respect of a given contract separate from an adjudication in respect of a different contract. Adjudication is a contractual mechanism and any dispute in respect of a particular contract cannot be connected with a dispute in respect of a different one. As I have identified, Mr Alway was keen to make clear that his jurisdiction in the first adjudication did not extend to dealing with any disputes arising in respect of Didcot. It was, in fact, perfectly correct for the adjudication in respect of the Tetsworth site to proceed on its own in the way that it did.

I am satisfied that it was and is an administrative error of no consequence that the letter from Gateley happened to include Didcot in its heading. Nothing turns on that at all.

The last matter on which Mr Boulton relies is the existence of the Collie decision which, he says, justifies granting either an adjournment of his liability to pay or a stay of execution in respect of his liability to pay the Alway fees because, he says, money will be coming back to his company as a result of the defendant's success in the Collie decision. In effect, he says that he should be allowed a stay in those circumstances.

The position is that the defendant has sought to issue a claim form in the High Court claiming damages as a result of the matters decided by Mr Collie. Those proceedings were not successfully issued because an address was wrongly identified but Mr Boulton has indicated that he intends to issue those proceedings shortly. Whether that be the right course for him to take is a matter about which he should take legal advice, but as things presently stand, those proceedings have not been issued. Perhaps more significantly, no adjudication has been commenced by Mr Boulton seeking to recover any losses flowing to the defendant as a consequence of the Collie decision.

The fact of the matter is that the Collie decision does not identify any sum of money due and owing to the defendant. Mr Collie simply decided that Croudace had not proven, on a balance of probabilities, that it was entitled to and did validly and lawfully terminate the contract under clause 16.4 of the Terms and Conditions and that it had not proved that they had no liability for any loss and damage, so they were essentially negative declarations. There is, therefore, at present no positive finding in the defendant's favour that money is due and owing to it, still less has there been any quantification of that liability.

Accordingly, there is at the present time, which is the moment when stay of execution is being sought, no timescale within which the amount which could be said to be owing to the defendant as a result of the wrongful termination will be determined. As Mr Smith has pointed out, it is well-established in the field of adjudication that the court does not allow, save in special and limited circumstances, a stay of execution or allow a set-off of prospective claims against an adjudicator's decision. I am satisfied that none of the special circumstances available in Squibb Group Limited v Vertase FLI Limited [2012] BLR 408 apply and nor is any basis for a prospective counterclaim justified as a reason to grant a stay of execution.

The fact of the matter is that there is no established claim, still less a quantified claim, for sums due to the defendant. The position may, perhaps, have been otherwise had the defendant been further down the track in getting the quantification of those sums established, but it has not done so at the present time.

In all those circumstances, I am satisfied that it is appropriate for there to be judgment for the sum claimed and I refuse a stay of execution on the basis of the matters outlined in Mr Boulton's submissions.

Later

This is an application for indemnity costs in respect of the judgment which I have just given. The claimant relies on para.24 of Harris Calnan Construction Company Limited v Ridgewood (Kensington) Limited [2007] EWHC 2738 in which His Honour Judge Coulson (as he then was) says that:

"The court will not encourage parties, who have no defence to a claim based on an adjudicator's decision, to use up valuable court time and the resources of the successful party in running unmeritorious points that are doomed to fail."

I am satisfied that in this case that is a fair description of the points that Mr Boulton wanted to raise and therefore that this is an appropriate case for indemnity costs to be awarded against the defendant.