CG Group Ltd v Breyer Group Plc

I handed down judgment in this matter on 5 September 2013 ([2013] EWHC 2722 (TCC)). The proceedings related to the enforcement of an adjudicator's decision which was challenged by the Defendant on the basis that there had been an excess of jurisdiction and a breach of the rules of natural justice on the part of the adjudicator. Judgment was given in favour of the Claimant in whose favour the adjudicator’s decision had been given and, as I understand it, the only issue which remains relates to costs. What is at issue is whether the costs, which are to be summarily assessed, should be on an indemnity basis and the level at which the costs should be assessed.

Essentially three points are made by the Claimant the first being that the Defendant acted unreasonably both in raising and maintaining defences on jurisdictional and natural justice grounds. In my view, I do not consider that the Defendant, represented as it was by competent and respectable solicitors and Counsel, acted unreasonably in putting forward the defences which it did. Although the challenge on jurisdictional grounds was weak, the challenge on the ground of an alleged failure to comply with the rules of natural justice was not without some merit. The argument in effect upon which as found the adjudicator could be said not to have breached natural justice rules was one which arose during the adjudication on the basis of what the Defendant (as respondent in the adjudication) argued in its Response. Having effectively been told by the Defendant that the "payment terms of the Sub-Contract Conditions would prevail", he could not really be criticised for proceeding on the basis that he could have regard to such terms although the Claimant was arguing that such terms for one reason or another did not apply.

The second point relates to the unfortunate provision of further written submissions by the Defendant and its Counsel after the oral hearing. I explained at Paragraph 33 of the first judgment that it was unfortunate because it had always been open to the Defendant to make these points towards the end of the oral hearing. This added to the cost because it would have been cheaper for it to have been dealt with at the end of the oral hearing on 23 August 2013. Obviously, the oral hearing would have lasted longer and there would have been some inevitable increase in the costs in any event. It is clear that some additional research on the fcats had to be done which might have not been so well addressed orally. My recollection is that the hearing was on a Friday afternoon, it was in the vacation and the argument had in any event proceeded until almost 5 pm. The point which Counsel raised for the Defendant in his later written submission addressed a point which was raised by Counsel for the Claimant in her oral reply submissions. Whilst it was most unfortunate that it was not raised at the oral hearing, I do not consider that it merits the imposition of indemnity costs.

The third point relates to offers which were made by the Claimant both before the proceedings were issued (on 18 July 2013) and shortly before the hearing (on 20 August 2013) to settle. Both offers however were put forward in terms of the payment first of £150,000 plus VAT and later £160,000 plus VAT in "full and final settlement of the Final Account" and "of all disputes between the parties relating to this project" respectively plus the adjudicator’s fees. What must be borne in mind however is that these offers were not to settle the pending and later issued proceedings which simply involved seeking the enforcement of the adjudicator’s decision; the offers related to a full and final settlement in effect of all issues between the parties arising out of or in connection with the underlying contract. An adjudicator’s decision is not "final" although it is temporarily binding on the parties until and unless it is in effect revised or set aside by the final dispute resolution process (usually arbitration or litigation). It is of course open to a party to adjudication enforcement proceedings to make an offer which is "without prejudice save as to costs" to settle those proceedings. Thus, it would have been open to the Claimant to offer to accept a sum less than it was claiming in the enforcement proceedings and then pray that in aid in seeking indemnity costs.

It is difficult for the Court to attach any weight to the offers, I assume made in good faith, because, relating as they do to the final accounting between the parties on the particular project (allowing for claims and counterclaims), the Court can have and has no knowledge or evidence as to whether the offers are realistic or not. This is particularly so in the current case when the adjudicator's decision awarding some £187,000 was based not on an examination of the merits of the Claimant’s claims but in effect on a contractual default procedure whereby if the Defendant did not in time challenge the Claimant’s application for payment it was bound to pay what had been applied for.

For these reasons I do not consider that indemnity costs are appropriate.

As the Claimant succeeded in these proceedings, it is entitled to its costs on the standard basis. It has put forward two bills, the first for £24,229.28 including VAT for the costs up to and including the hearing is and the second for £4,520.88 (also including VAT) relating to dealing with the post hearing belated submissions from the Defendant. Because, I have no doubt, the Claimant is registered for VAT, the maximum recoverable could only be the VAT exclusive sums of £22,294 and £3,767.40 respectively.

A number of points are made by Counsel for the Defendant about these bills, broadly along the lines that more hours than should reasonably be charged to the account of the Defendant are being claimed for.

I have formed the view that a sum of £18,000 represents a fair and reasonable assessment of the costs overall and a proportionate sum. This was not a particularly complex adjudication enforcement and it did not involve a particularly large sum (at just over £200,000 including the adjudicator’s fees). I accept in broad terms that it would be unreasonable to impose on the Defendant the costs of the 22.9 hours claimed for reviewing the adjudication submissions, drafting the pleadings and on legal research; 13 hours would be appropriate. Although the Court always welcomes the particular skills and experience of Leading Counsel, there are numerous adjudication enforcement claims in the TCC involving the same or larger sums in which Leading Counsel is not deployed but Junior Counsel is. £6,000 for Leading Counsel’s involvement is too large sum for the Defendant reasonably to have to pay and I would mark that down by several thousand pounds. As for the post hearing costs, £3,767.40 is a very large sum for what was a relatively limited exercise. Overall I would evaluate this at no more than £2,500.

There will therefore be a summary cost assessment of £18,000 which should be payable within 14 days.