Construction update

It's interesting that so many cases over the past few months have been less about the substantive issues of construction law '“ i.e. who gets paid what and who is in breach '“ and more about procedural issues. Given that the TCC (in London) has now ruled that, save for certain categories of cases, it will only consider cases with a value of £250,000 or more, we will probably see a change in the type and number of reported cases we see. County court judgments are rarely reported so many judgments that had previously been reported may not be now.

Protocol compliance

There are two recent cases that can be considered together as they relate to similar issues arising out of the Pre-action Protocol for Construction and Engineering Disputes. Both show a relatively relaxed approach to protocol compliance.

In Higginson Securities (Developments) Ltd and Another v Hodson [2012] EWHC 1052 (TCC) Akenhead J took a pragmatic view of the requirements of the protocol, refusing to stay proceedings following the claimant's alleged failure to comply with it.

Higginson had built a spiritualist church and flats on the Isle of Wight. Kenneth Hodson (Higginson's architect) was the defendant against whom Higginson claimed approximately £70,000, alleging professional negligence and overpayment of professional fees.

In responding to Higginson's letter of claim, Hodson denied any liability. Higginson then served its claim form and Hodson argued that Higginson had not followed the requirements of the protocol, particularly in that no without-prejudice meeting had taken place before proceedings were issued. Hodson applied to court for a stay of proceedings pending such a meeting taking place. Higginson offered that it would agree a stay provided that meeting took place within six weeks and, if unsuccessful, Hodson serve his defence within four weeks of that meeting. Hodson declined the offer unless Higginson agreed to accept an adverse cost consequence for alleged breaches of the protocol.

The court observed that the protocol should not be used as a 'weapon or tactic' but rather should always be considered in the context of the overriding objective, referring to paragraph 1.5 of the protocol where it is said that, in lower-value claims, the letter of claim and response should be kept simple and, in all cases, the costs incurred at the protocol stage should be proportionate to the complexity of the case and the amount of money that is at stake. The court referred to guidance set out in Orange v Hoare Lea [2008] EWHC 223 (TCC) and McAlpine v SIAC [2005] EWHC 3139 (TCC).

Akenhead J was critical of the approach taken by Hodson and his advisers, which was not, in the court's view, pragmatic. This case further confirms that the protocol meeting is not 'absolutely mandatory' and confirmation to practitioners also that slavish compliance with the protocol is not always a necessity. Above all, we should be considering what is appropriate for the circumstances we are faced with.

Along similar lines was Mason and others v Mills & Reeve (a Firm) [2012] EWCA Civ 498. Here, the Court of Appeal looked at what was alleged to have been an unreasonable refusal to mediate and the cost consequences of that. Davis LJ did point out that the Court of Appeal would not readily interfere in the discretion a trial judge has on costs but that here the court was not happy with the trial judge's view that a defendant, who was ultimately successful, had its decision not to mediate held against it in terms of costs.

CPR rule 44 sets out the guidelines for the court in exercising its discretion on costs. The court should consider all of the circumstances of the case including the conduct of the parties, including, for example, whether it was reasonable for a party to pursue a particular issue and any efforts made by the parties before or during the proceedings to try and resolve the dispute (see CPR 44.3(3)(a)(ii)). In this ?case, which was a professional negligence claim against a firm of solicitors, the solicitors had refused to participate in ?ADR following a proposal by the claimant. The reason given by the solicitors was ?that the claim had no merit.

The trial judge was critical of this on the basis that mediation could have achieved certain results, including identifying weaknesses in the parties' respective cases and potentially avoiding 'collateral reputational damage' to the solicitors. Davis LJ in the Court of Appeal had three key concerns with the trial judge's consideration of conduct relative to costs, namely that the solicitors had been proved right in their assessment of the claim; the judge had not identified what 'weaknesses' would have been revealed during a mediation; and it was not clear why potential avoidance of reputational damage to the solicitors was a relevant factor that should count against it in relation to costs, particularly because a settled claim may cause more reputational damage than a vindication in court. The Court of Appeal considered its own judgment in Halsey v Milton Keynes General Trust [2004] EWCA Civ576, in which it made clear that parties are not compelled to mediate, the merit of a case is a relevant factor and parties cannot be made to mediate where the opposition case lacks merit.

This case is useful guidance and reminds us of the decision in Halsey and the factors the court considers important in deciding whether it is unreasonable to refuse to mediate but, interestingly, shows an unusual willingness on the part of the Court of Appeal to interfere with a costs decision made by a trial judge.

Adjudication

The 'no dispute' argument is common in adjudications and one that will not go away in a hurry. In April of this year the TCC was called upon to enforce an adjudicator's decision and, in doing so, had to look at the crystallisation of the dispute and severability of the decision.

In Working Environments Ltd v Greencoat Construction Ltd [2012] EWHC 1039 (TCC), Greencoat had sub-contracted certain works to Working Environments. During the course of the works Working Environments applied for an interim payment. Greencoat certified a much lower amount. Payment was due by 14 January 2012. On 8 December 2011 Working Environments confirmed that they did not accept Greencoat's assessment and started adjudication proceedings six days later. Greencoat argued that the adjudicator had no jurisdiction as the date for payment had not yet passed. Akenhead J in the TCC dismissed this argument stating that it would be illogical to say that there ?cannot be a dispute about an interim valuation until after the valuation falls due for payment.

However, Working Environments had claimed two items totalling £25,000 during the adjudication proceedings which had not been raised before. Akenhead J considered those two items and held that he could sever the part of the adjudicator's decision in relation to those two items as there had been no crystallised dispute before. Mr Justice Akenhead had been involved in a similar case in 2008 (Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC)) in which he had said that: 'If the decision properly addresses more than one dispute or difference, a successful jurisdictional challenge on that part of the decision which deals with one such dispute or difference will not undermine the validity and enforceability of that part of the decision which deals with the other(s). The same logic must apply to the case where there is a non-compliance with the rules of natural justice which only affects the disposal of one dispute or difference.'

From the point of view of practitioners, it may become more commonplace to ask the adjudicator to set out his decision on an issue-by-issue basis so that, if there are any jurisdictional challenges in relation to the decision that might cause there to be a severing of certain parts, that can be done more easily.

Resourcing issues

does not break new ground but does make for interesting reading for practitioners working on conditional fee arrangements '“ arrangements that are probably more common than they have ever been.

Natas Group Ltd (in administration) was a sub-contractor that had been employed by Styles and Wood Ltd to carry out certain asbestos removal works at John Lewis' Oxford Street store. Natas was claiming over £3,000,000 and retained its solicitors on a 'conditional fee arrangement' basis. Styles and Wood's costs and Natas' own disbursements were partly covered by after-the-event insurance. In advance of the trial, it became apparent that Natas was behind schedule in its trial preparations. Counsel for Natas explained to Mr Justice Akenhead, with what the judge described as 'commendable frankness', that there had been a resource problem within Natas' solicitors' firm in that fewer fee earners than would be ideal were working on the case, the solicitors' photocopier had broken down, and an assistant solicitor had contracted chickenpox.

The judge, while appreciating the frankness, was less impressed with the explanation itself and said: 'The court is not impressed with the explanation that it is a lack of resources which has brought about the delays. If parties make arrangements with their solicitors whereby the solicitors are paid on a conditional fee basis and with the benefit of ATE insurance, those solicitors are professionally bound to provide the necessary resources to conduct the case efficiently and fairly. If additional photocopiers are required, they should be provided and, if not available in-house, outside commercial copiers must be used
If additional solicitors or counsel are required to keep to the court's or any agreed timetable, they must be deployed. One has to bear in mind that, although solicitors are taking a risk in proceeding on a conditional fee basis, they have doubtless what they consider to be a reasonable chance of recovering up to 100 per cent or even more by way of uplift on a usual fee if their client succeeds.'

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Accordingly, the court made a directions order with these principles in mind.

This case does not tell us something we did not already know but it is always a useful reminder when conducting any case that the court will generally be unsympathetic to any resourcing issues that solicitors may face when it is possible to resolve these problems by committing to more resource.

Anna Stillman is a principal at EMW Picton Howell (www.emwllp.com)

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