Judgement date: 28 July 2014
(1) A court may order a party to be indemnified for the payment of the adjudicator’s fees, where such an indemnity would be fair and proper (eg. where an unsuccessful party has failed to pay by a given deadline and the parties would otherwise be jointly and severally liable for those fees).
(2) A court may award indemnity costs in adjudication enforcement proceedings, excluding costs unreasonably incurred, where (a) the unsuccessful party is sophisticated and failed to pay amounts due pursuant to the initial adjudication proceedings, and (c) there is no conceivably justifiable reason why the defendant hasn’t paid.
Technology and Construction Court, Mr Justice Akenhead
Pochin Construction Limited (“Pochin”) was employed by Libery Property (G.P.) Limited (“Libery”) as main contractor to carry out renovation and refurbishment works at a property in Hyde Park Square, London.
The parties had referred disputes to adjudication on multiple occasions, and on previous adjudications Libery was said to “[take] every point that was going”. In the current case, the level of complexity of the dispute was so that the adjudication could reasonably have been completed in 28 days. However, both parties agreed on an extension to allow the Adjudicator to perform a more detailed analysis.
Libery, a sophisticated defendant with access to counsel and solicitors, challenged Pochin’s case on its merits and on jurisdictional grounds. By a decision issued on 3 July 2014, the Adjudicator dismissed Libery’s arguments and awarded Pochin £871,546.56 plus VAT, and also ordered Libery to pay Pochin’s fees and expenses in the sum of £58,846.80.
Libery failed to honour the Adjudicator’s award, and so enforcement proceedings were commenced on 11 July 2014. Libery acknowledged the enforcement proceedings, but did not participate in the proceedings, write to the Court or appear at the hearing on 28 July. In light of this, the Court held that it was not necessary to address any defences which might have been advanced by Libery and that this is an appropriate case for summary judgment. The Court enforced the Adjudicator’s decision.
Pochin sought an indemnity in respect of the adjudicator’s fees and costs.
Whether the Court should award indemnity costs.
The Court held that:
- Where an unsuccessful sophisticated party fails to provide a justifiable reason for not paying amounts due pursuant to the Adjudicator’s decision, the successful party may be entitled to indemnity costs. Given that Libery is a sophisticated defendant, the Court held that Libery could have raised appropriate arguments even without attending the hearing. As Libery had not done so, the Court held that there does not seem to be a conceivably justifiable reason for refusing to pay in the first place. Therefore, the Court gave a declaration that Pochin is entitled to be indemnified for the Adjudicator’s fees and for all costs and expenses, allowing Pochin to recover its costs in full.
- A successful party may be entitled to be indemnified where it is fair and proper that there should be an indemnity. Libery hadn’t yet paid for the Adjudicator’s fees, and Pochin would probably be jointly and severally responsible for paying those fees. The Court held that an indemnity would be fair and proper, and declared that Pochin be indemnified for these fees.
- An award for indemnity costs must exclude costs which can be said to be unreasonably incurred. The time taken and level of detail gone into by Pochin, the amount of documentation generated and the amount of the total bill was a concern to the Court. However, given that in previous adjudications Libery took to every point that was going, the Court held that it was reasonable for Pochin to anticipate the proceedings to be challenged and held that the time and costs incurred were reasonable. The Court thus allowed the costs in full.
- The Court granted summary judgment, and made a declaration that Pochin be entitled to indemnity costs.
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