Harding (t/a M J Harding Contractors) v Paice & Anor

This judgment deals with the assessment of costs and an application for permission to appeal following the hearing of the Claimant’s application for an injunction that was heard on 29 October 2014. The Claimant applied for an order restraining the Defendants from pursuing an adjudication begun on 14 October 2014. One ground of that application was that the Defendants had not complied with a decision in a previous adjudication, by which the Defendants were ordered to pay approximately £400,000 to the Claimant.

By a letter dated 27 October 2014, which was sent under cover of an e-mail timed at 15:23, the Defendants’ solicitors, Silver Shemmings, indicated their clients’ intention to comply with the earlier decision, and not to resist the application to enforce it, but said that their clients needed more time to find the money. Payment was promised by close of play on 3 November 2014.

The Claimant’s application for an injunction was made on two grounds. The first was that the Defendants had not complied with the previous decision. The second was that the proposed adjudication had been brought in relation to a question that had already been decided by the previous decision. As a result of the letter from Silver Shemmings dated 27 October 2014 the first ground largely fell away, leaving the second as the issue which occupied the court at the hearing on 29 October 2014. On that issue the Claimant lost.

By letter dated 31 October 2014, the Claimant’s solicitors proposed that a reasonable and fair basis for the apportionment of the liability for the costs of the Claimant’s application would be as follows:

“Period 1: The Defendants should pay the Claimant’s reasonable costs of the application to receipt of the Defendants’ e-mail of 27 October 2014 ….

Period 2: The Claimant should pay the Defendants’ reasonable costs from the time of receipt of the e-mail of 27 October up to and including the hearing, but with a suitable credit [25% was suggested] to be given to reflect the fact that the Claimant had had some success at the hearing in that he had obtained an interim stay of the Fourth Adjudication until the promised date of payment of the money owed under the Third Adjudication (which has subsequently been extended by agreement between the parties).”

A week later Silver Shemmings confirmed the Defendants’ agreement to this proposal, but making various criticisms of the quantum of the Claimant’s costs.

Accordingly, all that remains in dispute is the assessment of the Claimant’s reasonable costs up to the time of receipt of the letter of 27 October 2014 and the assessment of the Defendants’ costs thereafter. This is because the agreement set out above did not require the Defendants to pay any part of the Claimant’s costs after receipt of the letter of 27 October 2014: the Defendants were agreeing simply to accept a reduction of 25% in the recovery of their costs.

Of the time spent by theDefendants’ solicitors, I consider that five hours on letters out is likely to have preceded the time of receipt of the letter of 27 October. That letter was itself detailed and ran to over four pages. It referred to the papers for the Claimant’s application having been delivered at about midday on 22 October, and that the Defendants’ solicitors had taken their clients’ instructions. It is clear that the partner in Silver Shemmings must have spent some time considering the Claimant’s evidence and the documents in support. Of the seven hours of partner time that is claimed in the Defendants’ schedule of costs, I consider that two hours were probably spent after receipt of the letter of 27 October.

In relation to the assistant solicitor’s time, I consider that 9½ hours of the time set out in the schedule of work done on documents must have preceded the letter of 27 October. That schedule included an item of work described as “Witness Statement”. That was a reference to the preparation of a witness statement for Mr. Paice, apparently dealing with his financial position: however, no witness statement was ever served. In these circumstances I do not see how the costs of this work can be recoverable as costs of the application.

Also in relation to the assistant solicitor’s time, I would deduct a further 1½ hours in relation to letters out because I think that this work probably preceded the letter of 27 October. So, of the 25 hours claimed in the schedule of costs for the assistant solicitor, I allow 14 hours.

In relation to counsel’s fees, I would be very surprised if counsel did not advise his clients before the letter of 27 October was written, and so I am only prepared to allow the brief fee.

If these conclusions are unfavourable to the Defendants, they have only themselves to blame. No attempt has been made to cross reference the breakdown of hours set out in the letter from Silver Shemmings dated 6 November 2014 against the Defendants’ Schedule of Costs, which was belatedly served on behalf of the Defendants on 10 November 2014 (and after the time by which I had directed that submissions on costs were to be served).

In the result, I allow £630 in respect of the time spent by the partner, £3,850 in respect of the time spent by the assistant solicitor and £3,000 for counsel. This makes £7,480 in all, of which 75% is £5,610. That is the sum that I allow in respect of the Defendants’ costs following receipt of the letter dated 27 October 2014.

Taking the points raised in the letter of Silver Shemmings dated 6 November 2014, I reject points 1-4 for the reasons given in the letter from Davies and Davies dated 6 November 2014 (but wrongly dated 6 October 2014).

In relation to the solicitors’ costs, I have no reason to doubt that they were in the sum of £7,425 as asserted by Davies and Davies. However, Davies and Davies claim also the cost of preparing the trial bundle on 28 October 2014.

Having regard to the terms of the costs order agreed by the parties, namely that the Defendants should pay the Claimant’s costs of the application up to the time of receipt of the letter of 27 October 2014, I cannot see how the Claimant can recover the cost of preparing a bundle for the hearing if the work was carried out on 28 October 2014. It is perfectly true, as Davies and Davies have pointed out, that the bundle would have had to be prepared at some stage, but that is not the point. The parties have agreed what they have agreed and it is quite unambiguous.

I therefore assess the Claimant’s costs at £13,497.50: the breakdown of which is as set out in the letter from Davies and Davies dated 31 October 2014.

The Claimant submits that there is a real prospect of persuading the Court of Appeal that in the circumstances that arose in this case the absence of a Pay Less Notice converts a sum that may not be properly due into one that is properly due, and does so for all time. I do not agree that this argument has a real prospect of success: the purpose of the Scheme is to enable contractors and subcontractors in the construction industry to be paid quickly, not to provide a regime by which disputes about entitlement to payment could be resolved for all time simply by the absence of a notice served in time or in the correct form.

If the Claimant is wrong about this point, so that it may have been open to the Defendants to rely on some alternative mechanism for a further valuation of the amount properly due, there is no real prospect of establishing that the referral to the Fourth Adjudication has done this. This ground seems to me to have no prospect of success whatever: it is quite clear that the adjudicator in the Third Adjudication expressly declined to express a view on the proper value of the work carried out.

Finally, the Claimant submits that there is a real prospect of persuading the Court of Appeal that the wording of paragraph 9(2) of the Scheme should be construed so that it is not necessary for the first adjudicator to have decided the dispute (or some aspect of it) that is subsequently referred to the second adjudicator. In my view, as a matter of construction, this argument has virtually no prospect of success.

The Claimant also submits that there are compelling reasons for giving permission to appeal: in particular, the fact that this is a widely used form of contract and that there is no binding authority on the issues raised by the proposed appeal. The Claimant relies also on my reference to “far reaching consequences” in paragraph 33 of the judgment. However, that reference was to the consequences of the construction contended for by the Claimant on the facts of this case. Whilst I accept that this is a widely used form of contract, I consider that the situation that arose in this case is not one which is likely to arise often and so, whilst the consequences may be far reaching, the circumstances in which those consequences may follow are likely to be few and far between. Accordingly, I do not find that there are compelling reasons for giving permission to appeal.

For these reasons, I refuse permission to appeal.