Gotch & Anor v Enelco Ltd

A court should not determine an otherwise academic question merely because a party seeks a declaration. Where an alleged threat to adjudicate has been withdrawn and alternative dispute resolution is available, proceedings concerning the contractual or statutory right to adjudication may properly be stayed. Parties must assist the court in furthering the overriding objective, including by keeping costs proportionate and avoiding unnecessary procedural disputes, correspondence and applications. In assessing costs, the court may take account of unreasonable persistence with a threat, premature applications, and failure to comply with case-management orders.

The claimants sought a declaration under CPR Part 8 that their building contract with the defendant conferred no right to refer disputes to adjudication. They relied on the alleged deletion of the adjudication provisions and on the residential occupier exclusion in section 106 of the Housing, Grants, Regeneration and Construction Act 1996.

The defendant had threatened adjudication but later stated that it had no current intention to refer the dispute, proposing litigation and mediation instead. The court considered whether the declaration served any useful purpose, how the proceedings should continue, and the appropriate costs consequences of the parties’ conduct.

1. Disposition. The application for a declaration concerning the right to adjudicate was stayed. The proceedings were to continue as if commenced under Part 7 pursuant to CPR 8.1(3), enabling the defendant to pursue its contractual and damages claims by counterclaim.
2. The question whether the contract conferred a right to adjudicate had become academic. The defendant maintained that it had no current intention to refer a dispute to adjudication, while the parties pursued other means of resolving their dispute. Determining the issue would therefore achieve no useful purpose and would incur disproportionate time and costs.
3. Under CPR 1.3 and the overriding objective, parties and their solicitors must keep proportionality at the forefront of litigation. In TCC proceedings, parties are expected to identify and bring the real issues to trial in the most expeditious and economical manner. Unreasonableness, intransigence, procedural squabbles and correspondence conducted as a war of attrition are unacceptable.
4. The defendant’s prolonged threat of adjudication was unreasonable and operated as a negotiating tactic. The claimants were initially justified in preparing and issuing proceedings, but their immediate application for directions was premature. After receiving the order of 20 April 2015, they were required either to comply with it or apply to vary it; their refusal to do so was inexcusable.
5. The court ordered costs reflecting both parties’ conduct. The defendant was to pay the costs of issuing the proceedings, excluding the application notice, subject to repayment if the stay were lifted. The claimants were to pay the defendant’s costs between 17 April and 21 May 2015 on the indemnity basis and 50 per cent of the defendant’s attendance costs for the case management conference on the standard basis.