Adjudication is suitable for disputes little and large

I recently blogged about Savoye v Spicers, where Savoye successfully enforced the adjudicator’s decision after Akenhead J agreed that the conveyor belt Savoye installed formed part of the land and therefore the work constituted “construction operations” for the purposes of section 105 of the Construction Act 1996. As a result, the contract was a “construction contract” for the purposes of section 104. This meant that the adjudicator’s finding that Savoye was entitled to be paid the sum it claimed as a result of Spicers’ not serving the requisite payment notices (some £828,000 plus interest) was enforced.

Akenhead J has now handed-down his costs judgment, and it raises some interesting points. Savoye’s costs were a hefty £201,790 for the adjudication enforcement, albeit the matter was resolved in a short trial after a unsuccessful summary judgment application.

Savoye v Spicers – costs

Savoye argued that it was entitled to indemnity costs because Spicers acted unreasonably by raising an unmeritorious defence, which it maintained in both the adjudication and the court proceedings.

In contrast, Spicers accepted that it had to pay Savoye’s costs (because it “lost” the enforcement proceedings), but it argued that the summary judgment application was misguided and therefore it should not be liable for a substantial part of the costs. It rejected the indemnity costs claim, suggesting there was a “genuine area of factual dispute” which required a trial, rather than a summary judgment application to resolve.

Akenhead J dismissed Savoye’s claim that it should have its costs assessed on an indemnity basis, finding that Spicers’ conduct had not been “out of the norm” or unreasonable to a high degree.

Akenhead J then went on to consider the requirements of proportionality and reasonableness and provided a useful summary of the relevant factors. He concluded that a costs bill over £200,000 was disproportionate. In part this was because:

  • Savoye was dealing with the same issue in the enforcement proceedings that had been dealt with in the adjudication.
  • The issues raised were not complex and resulted in hearings of less than two court days.

After considering each category of costs in the bill, Akenhead J awarded Savoye costs of £96,465, which equates to less a little less than 50% of the sum claimed.

Little and large

There is no doubt that costs of £201,790 were high for an adjudication enforcement. This is particularly so in a case where payment was due as a result of a failure to issue the requisite notices, rather than on the merits of the value of the work. It is quite possible that the parties will incur even further costs arguing the merits in another adjudication and/or at a full trial.

No doubt some commentators will get somewhat vexed about these costs and claim that it demonstrates that enforcing adjudicators’ decisions is too expensive. However, I disagree entirely. One only needs to look at recent cases decided in the TCC to see that such a contention is wrong. For example, in Imtech Inviron v Loppingdale Plant, Edwards-Stuart J enforced an adjudicator’s decision in the sum of £643,283 and summarily assessed the costs on the standard basis in the sum claimed, namely £16,251.

At the time, he said that costs in an adjudication enforcement typically ranged from about £15,000 to £25,000 (excluding court fees). Savoye v Spicers is clearly the exception that proves the rule.

I can also anticipate some commentators taking things one step further and using the case to have a general rant by saying that it is evidence that, for example, adjudication:

  • Has morphed into domestic arbitration from the early 1990’s.
  • Is unsuitable for complex disputes.
  • Is no longer cost effective for small claims.

The case is clearly not evidence of any of these things but, notwithstanding this, I consider that these commentators have missed the point. Parties and their representatives like to use adjudication for high value complex disputes. Issues of extending the adjudication timetable are resolved in 99% of cases, parties like the fact that they will not be responsible for the other side’s costs and that they can always have another crack at it in arbitration or litigation (although they rarely do).

Also, adjudication still works just as well for lower value disputes. While most of the disputes I adjudicate are at the higher end of the scale, last year I decided a hotly contested fees claim of around £8,000 and my fees were under £2,000.

So, to summarise, adjudication shouldn’t always cost loadsamoney and, in my view, is suitable for disputes little and large.

MCMS Ltd Jonathan Cope

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