John Roberts Architects Ltd v Parkcare Homes (No. 2) Ltd

A contractual adjudication clause permitting an adjudicator to direct payment of legal costs may confer a costs jurisdiction even where the referring party withdraws before a substantive decision. The phrase as part of his decision is not necessarily limited to costs forming part of a contested decision on the merits. Withdrawal can remove the need for a merits decision, but it does not unilaterally remove an existing costs jurisdiction. The agreement must be construed objectively, considering its terms, context and commercial purpose. The statutory adjudication provisions and scheme provide context where the parties have adopted a compliant contractual procedure; they do not directly construe the contractual costs clause.

The appellant architectural practice and the respondent developer had agreed an adjudication procedure incorporating amended standard terms. The amendment empowered the adjudicator to direct payment of one party’s legal costs and expenses by the other as part of his decision.

The developer referred a substantial claim, then withdrew it before any substantive decision. The adjudicator nevertheless directed payment of the appellant’s legal costs. The Technology and Construction Court held that the adjudicator lacked jurisdiction because no substantive decision had been made. The appeal concerned the proper construction of the amended costs clause and the effect of withdrawal on the adjudicator’s jurisdiction.

1. Appeal allowed. May LJ delivered the judgment, with Keene LJ and Scott Baker LJ agreeing.

2. The parties had entered into a compliant contractual adjudication regime. Section 108 of the Housing Grants, Construction and Regeneration Act 1996 and the statutory scheme made under section 114(1) were relevant as context, but not as direct aids to construing the parties’ agreement. The agreement itself determined the adjudicator’s jurisdiction. The description in Macob Civil Engineering Limited v Morrison Construction Limited (1999) BLR 93 of adjudication as a speedy, provisional mechanism did not alter that conclusion. Northern Developments (Cumbria) Limited v Nichol (2000) BLR 158 concerned different circumstances under the statutory scheme and did not govern this contractual question.

3. The amended clause replaced the standard provision that each party should bear its own costs. Its natural meaning was that the adjudicator could direct payment of legal costs and expenses as part of what he was authorised to decide. It did not confine that power to a substantive contested decision on the merits. The court applied objective contextual construction, considering the whole agreement and its commercial purpose, consistently with Investor’s Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 and the apt commentary in Bromarin v IMD Investments (1999) STC 301.

4. A construction under which a party could generate substantial costs and then avoid all liability by withdrawing immediately before the decision would be very odd and uncommercial. The words did not clearly express that result. Commercial common sense could inform the construction, but could not justify rewriting the clause.

5. Withdrawal removed the need for a substantive decision on the referred claim, but did not unilaterally diminish the adjudicator’s existing jurisdiction to determine costs. May LJ considered, without needing to decide it, that the notice’s claim for costs might itself have brought that issue within the decision required by clause 20.

• Court of Appeal (Civil Division): [2006] EWCA Civ 64, 9 February 2006. Appeal allowed.
• Technology and Construction Court: HH Judge Richard Havery QC, judgment and order dated 25 July 2005. Held that the adjudicator lacked jurisdiction to direct payment of legal costs without a substantive decision.