In Gotch v Enelco Limited , Mr Justice Edwards-Stuart gave a warning to parties on the way in which they should conduct litigation in the Technology and Construction Court.
The defendant had built two residential properties for the claimants. The parties fell out after the claimants withdrew part of the work from the defendant and instructed others to carry it out. The defendant threatened to adjudicate but the claimant's solicitors contended that the contractual provisions in relation to adjudication had been deleted and the residential occupier exclusion within the meaning of section 106 of the Housing Grants, Construction and Regeneration Act 1996 applied.
Correspondence went back and forth between the parties' solicitors regarding the adjudication issue until the claimant's solicitors indicated that they were going to apply to court for a declaration in relation to whether there was a right to adjudicate. After further exchanges the defendant's solicitors eventually indicated that their client was withdrawing its threat to refer the matter to adjudication. However, the claimant issued Part 8 proceedings seeking a declaration solely in relation to the adjudication provision and at the same time applied for directions.
The application for directions which accompanied the claim form went before Edwards-Stuart J who said he was troubled by the application, not least because there was no imminent threat of adjudication proceedings so the declaration sought would probably serve no purpose. He therefore directed that there be a case management conference prior to which the parties were to attempt to agree a directions timetable with a view to resolving all the matters in dispute between the parties including whether the contract had been terminated and whether or not the defendant was owed any money.
Rather than addressing the directions which had been made, the claimant's solicitors wrote to the court to say that they thought there had been confusion about what they were seeking, they only wanted the judge to decide whether there was a right to adjudicate and they would therefore not be trying to agree directions for resolving the other issues. There were therefore no agreed directions when the matter came before Edwards-Stuart J at the case management conference which he had listed.
The judge decided to stay the claimant's application in relation to the question of adjudication and instead directed that the proceedings should continue as if they had been started under Part 7 – i.e the court would set a timetable for dealing with the whole dispute as a defended claim, allowing the defendant to pursue its counterclaim for damages.
In making his decision the judge was critical of both parties' conduct in relation to the dispute. In his view the defendant's solicitors should have appreciated much sooner that there was a serious issue in relation to the right to adjudicate and to continue to insist on referring the right to adjudication was bound to provoke the claimants into resisting it. He concluded that the conduct of the defendant in persisting with the threat of adjudication for as long as it did was unreasonable.
In so far as the claimants were concerned the judge found that it was not appropriate for the claimants to make an application for directions when they issued their claim without any reference to the defendant. Having obtained the order giving directions they should have complied with it. Writing to the court to say they had no intention of complying because they thought the judge had misunderstood what they were seeking was "inexcusable".
In giving his decision Edwards-Stuart J made the following comments which parties will need to take into account when conducting litigation in the TCC to avoid adverse costs consequences:-
"It is therefore time to say, in the clearest terms, that parties and their solicitors can no longer conduct litigation in a manner which does not keep the proportionality of the costs being incurred at the forefront of their minds at all times.
It is no longer acceptable – if it ever was – for parties to pursue issues or applications that have no real impact on the issues that are central to the dispute. Further, it is no longer acceptable for solicitors to carry on a war of attrition by correspondence, whether instructed to do so or not...there will only rarely be any justification for fighting or taking points simply "as a matter of principle".
Whilst English law is an adversarial process, that goes to the issues in the case: not to every aspect of the procedure. Parties to litigation, in the TCC at least, are expected to conduct that litigation in the manner that is most expeditious and economical...
Unreasonableness, intransigence and the taking of every point must in my view now be regarded as unacceptable, because conducting litigation in that way flies in the face of the overriding objective as it is now formulated. These habits must disappear from the landscape of litigation in the TCC. If they do not, offending litigants must expect to bear the costs.
...Procedural squabbles must be banished and a culture of cooperative conduct introduced in their place."
It remains to be seen what impact the decision will have on the landscape of litigation in the TCC but in the meantime, parties and their advisers have been warned. Failure to adhere to Edwards-Stuart J's comments could result in significant costs penalties for a party, even if they are otherwise ultimately successful in their claim or defence.
For more information about how to conduct litigation in the Technology and Construction Court or to find out more about how the Construction or Dispute Resolution teams can help you please contact Rowan Turrall on [email protected] or 0118 952 7206.
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