Building contract – Dispute – Adjudication – Defendant wishing to refer dispute over building contract to adjudication – Claimants applying for declaration that building contract not providing for reference to adjudication – Application stayed
The claimants entered into a contract with the defendant company to carry out building works in respect of two residential properties, which were to be constructed on a plot of land owned by the claimants. The Defendant alleged that the claimants had repudiated the contract by withdrawing part of the work from the defendant and instructing others to carry it out. It therefore claimed damages for breach of contract. The claimants’ case was that, even if there had been a breach of contract (which was denied), the defendant had affirmed the contract so that it remained in force.
In a letter of 20 March 2015 the defendant suggested that the dispute should be referred to a suitable adjudicator and not one appointed by the RIBA. They said that in the absence of agreement by the claimants to one of a list of names, the defendant would ask the RIBA to nominate an adjudicator.
The claimants brought a claim under Part 8 of the CPR for a declaration that the building contract did not entitle the defendant to refer a dispute to adjudication. The basis of the claimants’ claim was, first, that the provision for adjudication in the Contract Articles had been deleted. Secondly, the claimants were residential occupiers within the meaning of section 106 of the Housing, Grants, Regeneration and Construction Act 1996. The defendant argued that, in the Contract Particulars, the provision relating to adjudication had not been deleted. Furthermore, one of the properties was currently being marketed as a holiday let and was therefore not a property intended for residential occupation.
Held: The application was stayed.
(1) No useful purpose was to be served by the pursuit of the claimants’ application for a declaration in relation to the right of adjudication. Both in correspondence and at the hearing the defendant had maintained the position that it had no current intention to refer any dispute to adjudication. So long as that remained the position and the parties were engaging in some alternative means of dispute resolution, the question of whether or not the contract conferred a right to adjudicate any dispute was academic. The time and costs of resolving that question would therefore achieve nothing. In those circumstances, the claimants’ application would be stayed and the present proceedings should continue as if they had been started under Part 7, pursuant to CPR 8.1(3). To that end the defendant would be able to pursue the determination issue and its claim for damages by way of counterclaim.
(2) By CPR 1.3 the parties were required to help the court to further the overriding objective of dealing with cases “at proportionate cost”. It was time to say, in the clearest terms, that parties and their solicitors could no longer conduct litigation in a manner which did not keep the proportionality of the costs being incurred at the forefront of their minds at all times. It was not acceptable for parties to pursue issues or applications that had no real impact on the issues that were central to the dispute. Further, it was no longer acceptable for solicitors to carry on a war of attrition by correspondence, whether instructed to do so or not: it was the parties who were the subject of the duty in CPR 1.3, not merely their solicitors.
(3) Litigation in the Technology and Construction Court (TCC) was primarily commercial. In a few cases, such as the present, the subject matter was, or was at least said to be, buildings intended for residential occupation. Nevertheless, these were substantial properties. So even in a case such as this, there would only rarely be any justification for fighting or taking points simply as a matter of principle. Whilst English law was an adversarial process, that went to the issues in the case, not to every aspect of the procedure. Parties to litigation, in the TCC at least, were expected to conduct that litigation in the manner that was most expeditious and economical. Bringing the right issues to trial in the most economical fashion, and taking steps to ensure that the costs were kept at a level that was proportionate to what was at stake, was to be at the heart of the process.
(3) Unreasonableness, intransigence and the taking of every point had to be regarded as unacceptable, because conducting litigation in that way flew in the face of the overriding objective. Those habits had to disappear from the landscape of litigation in the TCC. If they did not, offending litigants had to expect to bear the costs. If access to justice was to have any real meaning, then the aim of keeping costs to the reasonable minimum had to be paramount. Procedural squabbles had to be banished and a culture of cooperative conduct introduced in their place. This would not prevent contentious issues from being tried fairly but should promote it.
(4) Having considered the conduct of the parties in the light of those principles, the claimants had been justified in preparing the present proceedings. It was not until they received a letter on 13 April 2015 that those advising the claimants should have appreciated that there was no current risk that the defendant would make an imminent referral to adjudication, by which time the costs of preparing the proceedings had largely been incurred. Thus the claimants were justified in issuing the proceedings when they did in spite of this last minute change of position by the defendant. Those advising the defendant should have appreciated, much sooner than they did, that there was a serious issue in relation to the right to adjudicate under the contract and that to insist on referring the dispute to adjudication was bound to provoke the claimants into resisting it. The conduct of the defendant in persisting with the threat of adjudication for as long as it did was an unreasonable negotiating tactic.
(5) By contrast, it was not appropriate for the claimants to make an immediate application for directions without any reference to the defendant, which was what they did. The appropriate course, having issued the proceedings, was to seek an undertaking from the defendant that it would not refer the dispute to adjudication in the near future or, at least not without giving the claimants sufficient notice to obtain an injunction to restrain the pursuit of any referral to adjudication that the defendant might make. That the claimants had not done. Accordingly, the claimants’ approach of seeking an immediate order for directions for the further conduct of the application was both inappropriate and premature. But having done that, and having obtained an order, the claimants should have complied with it. To write to the court a week after the order was made saying that they had no intention of complying with it because they thought the judge had misunderstood the position was inexcusable. The conduct of the claimants in persisting in proposing directions that were not in accordance with the order had been pursued right up to the hearing was inexcusable conduct.
Krista Lee (instructed by Michelmores LLP) appeared for the claimants; Thomas Crangle (instructed by Addleshaw Goddard LLP) appeared for the defendant
Eileen O’Grady, barrister
Click here to download the transcript of Gotch and another v Enelco Ltd
