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Jean-Yves Gilg

Editor, Solicitors Journal

Jean-Yves Gilg

Editor, Solicitors Journal

Jean-Yves Gilg

Editor, Solicitors Journal

Jean-Yves Gilg

Editor, Solicitors Journal

Jean-Yves Gilg

Editor, Solicitors Journal

Update: construction

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Update: construction

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Anna Stillman considers the implications of the Jackson report for construction litigation, the application of the ‘slip rule' by an adjudicator, the rules on the use of a single joint expert, and the court's grant of a stay of proceedings following an adjudication

The publication on 14 January 2010 of Lord Justice Jackson's review of civil litigation costs in England and Wales was probably the most significant review of litigation since the Woolf Reforms (see Solicitors Journal 154/2, 19 January 2010). The recommendations of the review apply to litigation across the board but, although no wholesale changes to the Technology and Construction Court procedures have been recommended, there will be an impact on construction litigation if a number of the recommendations are implemented. These potential changes include:

  • ADR: there could be a 'serious campaign' to promote ADR, with a handbook being published by a neutral body to set out everything you need to know about mediation.
  • Pre-action protocol: it was recognised that pre-action protocols are becoming increasingly costly to comply with and the recommendation is that the construction and engineering pre-action protocol be simplified so that parties spend less in complying with it. Consideration will also be given to abolishing it altogether in 2011.
  • Fast track: a 'fast track' is recommended for the Technology and Construction Court for cases with a value of less than £25,000. The costs of pre-determined stages of the litigation will be limited and will be set at pre-determined levels.
  • Disclosure and document management: it is recognised that construction disputes quite often have an extraordinary amount of paperwork so a more flexible system of disclosure for large cases is recommended, with new court technology to reduce the cost of document management in the run up to trial.
  • Pleadings and witness statements: there is a recommendation that parties whose pleadings or witness statements are too lengthy should be penalised in costs.
  • Part 36 offers: it is recommended that if a defendant rejects a part 36 offer and is then liable for costs, an additional ten per cent in damages should be payable. This is to penalise a wrongful rejection of a part 36 offer.

For practitioners, the introduction of the pre-action protocol has changed the way that disputes are managed, with a large amount of money being spent 'up front' by clients. A change to this could mean that the emphasis will not be upon detailed investigation and analysis of the facts at pre-action stage, and this will affect the approach to litigation generally and matters such as settlement negotiations and formal settlement offers. In relation to a fast-track process in the TCC, more will be known about whether such a process could be attractive when the levels for the pre-determined costs are decided upon.

The 'slip rule'

This is an adjudication decision that should be read in light of previous authorities such as Bloor Construction v Bowmer and Kirkland [2000] and YCMS Limited v Grabiner [2009] EWHC 127 (TCC), in which it was established under English law that there is an implied term that an adjudicator can correct errors in his decision so long as those errors are corrected within a reasonable period of time.

In O'Donnell Developments Ltd v Build Ability Limited [2009] EWHC 3212 (TCC), an adjudicator was asked to decide the value of sub-contract works undertaken by the claimant and the validity of deductions made by the respondent against that valuation. The adjudicator decided in favour of the claimant and based the level of the financial award on figures provided by the claimant '“ and agreed by the respondent '“ which were misleading. This had the effect that the decision in favour of the claimant was around £150,000 less than it should have been. The claimant raised this and the adjudicator confirmed that he would correct the error and revised his decision within two days of the date of issue of his original decision. The respondent objected to this revision and subsequently did not pay the award.

Justice Ramsey held that an adjudicator can correct his decision so long as it is done within a reasonable period of time. Further, he looked at the issue of the extent to which the court can interfere with the exercise of an adjudicator's power under the 'slip rule', saying that in looking at whether an adjudicator was acting within his jurisdiction in operating the slip rule, the court should be careful not to see a mistaken operation of the slip rule as a decision outside of the adjudicator's jurisdiction. Here, the court held that it should not interfere with the adjudicator's powers within his jurisdiction. In any event, Justice Ramsey thought that the adjudicator here was only giving effect to his intentions and was not reconsidering his original decision.

This case provides another example of the court not wishing to interfere with an adjudicator's decision, effectively saying that it is within the jurisdiction of an adjudicator to decide whether to correct his decision and so, even if his decision to correct is wrong, the fact that he has not gone outside of that jurisdiction means that the court should still enforce the decision.

Single joint expert

In Edwards v Bruce and Hyslop (Brucast) Ltd [2009] EWHC 2970 (QB), the court refused permission to appeal certain case management directions given in the Technology and Construction Court (TCC) concerning a claimant's ability to instruct an expert of its own where previously a single joint expert had been directed.

In short, the value of the dispute and the fact that the parties had previously appointed an expert jointly led the TCC to order that expert evidence be given by a single joint expert. However, following a number of reports from that single joint expert, it became apparent that the defendant's solicitors had been corresponding with the expert, without the knowledge of the claimant or their solicitors. At the case management conference, the judge gave directions that the claimant be entitled to instruct their own expert, applying the principles in Peet v Mid Kent Healthcare Trust [2001] EWCA Civ 1703. The judge found that the usual position of a single joint expert in a case of this sort was no longer tenable.

This case underlines the importance of ensuring that where a single joint expert is instructed, all parties to the litigation are fully aware of and involved in discussions and communications with the expert.

Stay of proceedings

In recent months, the Technology and Construction Court has considered many requests for a stay of execution of an adjudicator's decision where the party receiving payment is in financial difficulties and the paying party is concerned that should a subsequent adjudication decision or judgment order a repayment of those sums, no funds will be available to pay. Anglo Swiss Holdings Limited and Others v Packman Lucas Limited [2009] EWHC 3212 TCC is concerned largely with an application by the defendant in those proceedings for a stay of proceedings pending payment by the claimant in respect of an existing adjudicator's decision.

Before setting out the facts and decision in this case, one thing to bear in mind is the underlying principle of adjudication, namely that the parties should 'pay now, argue later'.

Here, Packman Lucas Limited had previously adjudicated against Anglo Swiss Holdings Limited in respect of alleged unpaid fees. Anglo Swiss defended the adjudication by saying that no fees were due and that they had actually overpaid Packman. Anglo Swiss lost the adjudication mainly because of a failure to issue a notice of intention to withhold payment. Therefore, the adjudicator ordered that Anglo Swiss was to pay Packman.

Anglo Swiss failed to pay the adjudicator's award and Packman subsequently obtained judgment in default in enforcement proceedings. The payment still did not materialise. Anglo Swiss issued the present proceedings to recover the alleged overpayment from Packman, and Packman then applied for the proceedings to be stayed because: (a) the judgment obtained following the adjudicator's decision should be paid before proceedings continued; and (b) the claimant had not complied with the Pre-action Protocol for Construction and Engineering Disputes.

The judge noted that while the CPR gave a power and discretion to stay proceedings, that power and discretion should be used 'sparingly and in exceptional circumstances'. Such circumstances could include bad faith and where a claimant has acted particularly oppressively or unreasonably. The judge here held that Anglo Swiss had ignored the contractual and statutory obligation to honour the adjudicator's decisions and was ignoring the 'pay now, argue later' principle of the Housing Grants, Construction and Regeneration Act 1996 and was accordingly trying to obtain an unfair advantage over Packman. There was also, the judge said, bad faith on the part of Anglo Swiss in that its claims were either known to be 'significantly exaggerated' or of which it had no information as to the merits.

On this basis, a stay was granted. However, the court went on to look at the issue of compliance with the pre-action protocol. The court looked at paragraph 1.2(iv) of the protocol, which states that a claimant shall not be required to comply with the protocol to the extent that the proposed proceedings relate to 'the same or substantially the same issues' as had been the subject of recent adjudication. Packman argued that this provision should not apply because the claim in the proceedings related to overpayments and this was an issue that the adjudicator had refused to consider. The judge held that notwithstanding the adjudicator's position, the parties would have exchanged information about their claims or defences in relation to the issue of overpayment and therefore it would be 'unnecessary and burdensome' to repeat that process in the context of the protocol.

This case emphasises that a party cannot avoid an adjudicator's decision simply by beginning court proceedings on the same or similar issues. It really reaffirms the position that always existed in relation to the rational for adjudications, that is, 'pay now, argue later'.