In Octoesse LLP v Trak Special Projects Ltd [2016] EWHC 3180 (TCC), England’s Technology and Construction Court held that costs of claims consultants assisting litigants in person can be recovered as a disbursement in adjudication enforcement proceedings, assuming that the same consultant represented that party in the adjudication. The other issue before the court was the construction of a term in a contract based on the JCT Intermediate Building Contract. The Court held that the effect of the term in question was that a certificate of non-completion was a condition to a pay-less notice deducting liquidated damages from the sum stated as due in the final certificate. Here, the Court held that the clause was a mandatory one which required the Contract Administrator to issue a further certificate of non-completion following an extension of time, as the extension of time had the effect of cancelling the previous certificate.

Background

The Claimant Octoesse LLP was the employer and the Defendant, Trak Special Projects Ltd (Trak), the contractor in relation to a construction project for residential and retail units in London. The contract was based on the JCT Intermediate Building Contract 2011, with bespoke amendments (Contract).

As the project was not completed by the completion date, Octoesse issued a certificate of non-completion on 3 October 2014, following which a partial extension of time was granted. The works were certified as practically complete on 13 February 2015. On 3 July 2015, Trak submitted a claim for a further extension of time, which was subsequently granted by Octoesse. However, no further certificate of non-completion was issued.

After the final certificate was issued for payment, Octoesse issued a pay less notice, deducting liquidated damages. Trak argued that the pay less notice was invalid because under clause 2.23.1 of the Contract the Contract Administrator had to issue a further non-completion certificate under clause 2.22 before it was entitled to deduct liquidated damages. As no further non-completion certificate had been issued, Trak argued, Octoesse, had no right to deduct liquidated damages.

Trak had obtained an adjudication award in its favour that Octoesse was not entitled to deduct liquidated damages, that the pay less notice was invalid and that Octoesse should pay Trak the amount requested. Octoesse therefore commenced these proceedings for certain declarations regarding clauses 2.22 and 2.23 of the Contract and argued that the adjudicator's award was unenforceable.

Was a further non-completion certificate required in order to deduct the liquidated damages?

Clause 2.22 provided that:

“If the Contractor fails to complete the Works or a Section by the relevant Completion Date, the Architect/Contract Administrator shall issue a certificate to that effect. If an extension of time is made after the issue of such a certificate, the extension shall cancel that certificate and the Architect/ Contract Administrator shall where necessary issue a further certificate.” (Emphasis added).

Clause 2.23 provided that:

“.1 Provided: .1 the Architect/ Contract Administrator has issued a certificate under clause 2.22; and .2 the Employer has notified the Contractor before the date of the Final Certificate that he may require payment of, or may withhold or deduct, liquidated damages, the Employer may, not later than 5 days before the final date for payment of the amount payable under clause 4.14, give notice to the Contractor in the terms set out in clause 2.23.2.” (Emphasis added).

Octoesse argued that a further non-completion certificate was only required “where necessary” and that it was not necessary because Trak was already aware of its potential liability for liquidated damages. However, the Court held that use of the word “shall” in Clause 2.22 imposed a mandatory obligation on Octoesse to issue a non-completion certificate if the contractor failed to complete the works by the relevant completion date, including the original date for completion and any extended date. As the effect of an extension of time was to cancel any certificate previously issued, Octoesse could not rely on the pre-extension certificate as fulfilling the condition in clause 2.23.1.1.

In respect of the words “where necessary”, the Court held that this only meant that it would not be necessary for Octoesse to issue a certificate if the effect of the extension of time was that the contractor no longer failed to complete the works by the completion date, so that a further non-completion certificate was irrelevant.

Accordingly, the Court held that the condition for deducting liquidated damages was not fulfilled.

Recovery of Consultant’s Costs incurred by Trak

Trak was a litigant in person who had instructed Counsel on a direct access basis under the Bar Council’s Direct Access Scheme. Trak had also engaged construction claims consultants (Consultants) to assist with the proceedings. The question before the Court was whether Trak could recover the Consultant’s costs in relation to consideration of the claim, preparation of the defence and witness statement, instructions to counsel, liaison with the court and court attendance.

According to Rule 46.5(3) of the UK’s Civil Procedures Rules “a litigant in person can recover the costs for the same categories of work and disbursements, which would have been allowed if the work had been done or the disbursements had been made by a legal representative on the litigant in person's behalf”. There is an equivalent provision in Hong Kong’s Order 62 Rule 28A(1) of the Rules of the High Court (Cap.4A).

The Court held that in deciding whether the costs of claims consultants or other consultants who give advice can be recovered by a litigant-in person, the relevant question was whether, in that particular instance, such costs would have been recoverable as a disbursement if it had been made by a solicitor. Costs would be recoverable as a disbursement by solicitors, the Court said, if the work was such as would not normally be done by solicitors. Nonetheless, there may be specialist assistance, the costs of which would also be recoverable, the Court said, so that in particular circumstances a solicitor might well not normally carry out work himself but rely on a specialist, even though the work in its broad description might be a “solicitor’s work”.

The Court recognized that what are normal solicitors’ disbursements may vary according to the nature or type of case. It said that there are distinct features of adjudication and adjudication enforcement proceedings which can and should be taken into account in considering what disbursements would be recovered if made by solicitors and which are therefore recoverable by a litigant-in-person.

The Court held that costs incurred by claims consultants assisting a litigant-in-person will usually be recoverable in adjudication enforcement proceedings, assuming that the same consultants represented the party in the adjudication below. Such costs will usually fall within the meaning of “disbursements” in CPR 46.5(3) (see above), the Court said, given the nature of adjudications. In the adjudication process, the Court said, parties are often represented by claims consultants or other consultants and when enforcement proceedings are brought, the grounds for resisting enforcement are often founded on issues relating to the conduct of the adjudication. Even if solicitors are instructed in the enforcement proceedings and, particularly where they have not acted in the adjudication, the Court said, it would be common practice (and in many cases necessary) to seek the assistance of claims consultants involved in the adjudication.

Further, given the accelerated timetable in adjudication enforcement proceedings which abridge time limits and enable summary judgment applications to be heard promptly, it would be entirely normal, and indeed necessary, for solicitors instructed at the enforcement stage to seek assistance from those who represented the parties in the adjudication, the Court said. So, for example, whilst solicitors would normally draft witness statements, in adjudication enforcement it might be equally normal for them not to do so and to instead rely on those with specialist knowledge, not of the adjudication process generally, but of the particular adjudication.

In this particular case, the Court said that had solicitors been instructed to conduct the litigation, it would have been both practical and normal for them to seek the assistance of the Consultants who had acted below and were familiar with the factual background, the conduct of the adjudication and the arguments that Octoesse had advanced. Therefore, such disbursements were recoverable.

Comments

JCT Intermediate Building Contracts are not commonly used in Hong Kong. However, Clause 2.22 of that form of contract is similar to Clause 24.1(2) of Hong Kong’s Standard Form of Building Contract (2005 edition) which provides as follows:-

If a new Completion Date is fixed after the issue of the [first Certificate of Non-Completion], the fixing of the new Completion Date shall cancel that certificate and the Architect shall, if appropriate, issue another certificate to correspond to the new Completion Date.”

The Court’s ruling in the above case should therefore be applicable to Clause 24.1(2) of the Hong Kong Standard Form, although the wording “where necessary” in the JCT Form has been replaced by “as appropriate” in the Hong Kong Form. In fact, the meaning of “as appropriate” in Clause 24.1(2) should be even clearer than “where necessary”.

As regards the Court’s ruling in respect of recovery of costs of claims consultants, it illustrates the relaxed approach of the English Courts in adjudication enforcement proceedings. It is not clear whether the same approach would be adopted if the same happens in Hong Kong when adjudication is used under the security of payment legislation, to be implemented in due course.