Deko Scotland v Edinburgh Royal Joint Venture & Anor [2003] ScotCS 113

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In adjudication there is an implied power to have any award of costs or expenses taxed by the Auditor of Court. Before the award of expenses could be enforced the successful party's account must be agreed or remitted to the Court for taxation.

Lord Drummond Young of the Outer House, Court of Session

11 April 2003

The Defendants (the JV) were the participants in a joint venture set up to design and construct the new Edinburgh Royal Infirmary and Medical School. Deko was a sub-contractor.

The sub-contract contained provisions for adjudication in terms of the HGCRA 1996 with the procedure governed by the ORSA Adjudication Rules – 1998 Version 1.2, subject to a large number of amendments. The issue here was in relation to one of the amendments, namely the power of the adjudicator to award costs (rule 21A).

A dispute arose between the parties. Within the adjudicator's decision the adjudicator ordered that the JV pay Deko one half of its costs including legal costs. Thereafter Deko made an application for summary judgment for payment of the whole of the sums found due by the adjudicator plus interest and VAT on those sums. Deko also claimed an amount said to represent one half of its costs of the adjudication. Settlement was reached between the parties on all matters save for the costs.

The JV argued that Rule 21A dealing with costs provided that only judicial costs could be recovered. No power was to be conferred to require a party to pay any other costs. Further, the JV submitted that any award of costs was liable to taxation (assessment by the Court) and that a party in whose favour an award was made should not be entitled to enforce the award until his account of costs had been taxed by the Auditor of Court.

Deko submitted that even if the power to award costs was confined to judicial expenses all that could be said was that the adjudicator had misapplied the law to the facts of the case. This would not be a good reason for refusing to enforce an adjudicator's award. In relation to taxation it was submitted that this issue had not been raised before the adjudicator. There was no provision in the contract or the ORSA Rules that empowered the adjudicator to remit expenses to taxation.

The Court said the adjudicator was not entitled under Rule 21A to make any award of costs other than those of legal costs. In adjudication there is an implied power to have any award of costs or expenses taxed by the Auditor of Court. Before the award of expenses can be enforced the successful party's account must be agreed or remitted to the Court for taxation. The Court said the claim for costs was irrelevant as it was not based on a taxed account of costs and had not been agreed between the parties. Accordingly, the whole of Deko's costs relating to the adjudication had to be remitted to the Auditor before any part of it could be recovered by judicial proceedings.

The Court considered the adjudicator's jurisdiction in relation to costs and explained that Rule 21A was intended to confer on the adjudicator a power to award the costs of the adjudication. As such it is clearly a provision that confers power to act on the adjudicator. On that basis any error made by the adjudicator as to the construction of the power conferred by that rule would be subject to review by the Court.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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