Contract incorporating standard terms — Adjudicator — Jurisdiction to award costs — Application for adjudication withdrawn before decision reached — Whether adjudicator having power to order payment of one party’s costs by another — Appeal allowed
The parties entered into a construction contract that incorporated the Construction Industry Council’s (CIC) model adjudication procedure, including the RIBA conditions of engagement or the appointment of an architect. Clause 29 of the CIC procedure was deleted and replaced with the words: “The adjudicator may in his discretion direct the payment of legal costs and expenses of one party by another as part of his decision. The adjudicator may determine the amount of costs to be paid or may delegate the task to an independent costs draftsman.”
The respondent twice referred a dispute to adjudication, but each time abandoned proceedings before an award had been made. On the second occasion, the adjudicator directed the respondent to pay the appellant’s legal costs and expenses of the adjudication. An issue arose as to whether the adjudicator had the power under the contract to make such a direction. At first instance, the judge held that the adjudicator was not empowered to award the appellant its costs: see [2005] EWHC 1637 (TCC); [2005] BLR 484. The appellant appealed.
Held: The appeal was allowed.
The adjudicator’s power to direct the payment of legal costs was not limited to circumstances in which he made a substantive decision on the dispute referred to him. It was not unusual for construction contract adjudications to be adversarial and therefore expensive. Parties were entitled to make an amendment to a standard form giving the adjudicator jurisdiction to direct payment of legal costs, so long as the amendment complied with any statutory requirements.
The natural and commercially sensible meaning of clause 29 was that the words “as part of his decision” meant “as part of what he may decide”, rather than”but only as part of his substantive contested decision”; Co-operative Wholesale Society Ltd v National Westminster Bank plc [1995] 1 EGLR 97; [1995] 01 EG 111 and Bromarin AB v IMD Investments Ltd [1999] STC 301 considered.
Ronald Walker QC (instructed by Squire & Co) appeared for the appellant; Francis Tregear QC (instructed by Fladgate Fielder) appeared for the respondent.
Eileen O’Grady, barrister
