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A COSTLY AFFAIR

LEGAL

In adjudications, the losing party is generally ordered by the adjudicator to pay his or her fees, writes Sue Lindsey.

But the winner usually ends up footing the bill for their own legal costs, as it is relatively unusual for a contract to give an adjudicator power to order the losing party to pay costs.

But the RIBA form CE/99 does just that. The form incorporates the Construction Industry Council's Model Adjudication Procedure, but Clause 9.2 of the RIBA form amends the CIC procedure to allow the award of costs by the adjudicator 'as part of his decision'.

But what if the adjudicator does not give a final decision on the dispute? Can they still make an order about costs?

The answer turns on the correct interpretation of Clause 9.2, to which question the Court of Appeal has now given us an answer (John Roberts Architects Ltd v Parkcare Homes (no. 2) Ltd (9 February 2006)).

Parkcare referred a claim for £1.3 million against Roberts to adjudication.

Parkcare spent a lot of money putting together its response.

But Parkcare discontinued its claim before the adjudicator made a decision. Roberts asked the adjudicator to order Parkcare to pay its costs.

Parkcare said that the adjudicator had no power to do so. He could, it argued, only order costs 'as part of his decision'. There was to be no decision as the adjudication had been stopped before that stage was reached, hence no power to order costs.

The adjudicator sought advice from leading counsel as to what he could and could not do. Counsel advised him that he had the power to order Parkcare to pay, and he did; £87,000 to Roberts, and £14,000 for his and counsel's fees since the discontinuance.

When Parkcare did not pay, Roberts went to court.

The judge at first instance decided that the adjudicator did not have the power to order costs, but the Court of Appeal disagreed. They held that, as a matter of commercial common sense, it would be very odd indeed if the parties had agreed to only give the adjudicator power to order costs if he made a decision on the substantive dispute. It would mean that one or the other party could pull out of the adjudication at the last minute, leaving the other side with no right to recover their costs.

That did not square with having made an agreement that made costs recoverable.

But the parties and the court have to work within the confines of the agreed wording.

Could it be interpreted so as to reflect this commercial common sense? In support of its case, Parkcare had argued that Roberts' interpretation only stood up if the words 'as part of his decision' were left out. But the court held to the contrary that Parkcare's interpretation would only be sustainable if there had been extra words, if the adjudicator had had the power to order costs '?but only as part of his substantive contested decision'.

That was not what Clause 9.2 said, and the words 'as part of his decision' simply meant 'as part of what he may decide'.

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