Gipping Construction Ltd v Eaves Ltd [2008] EWHC 3134 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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summary

This case shows that failure by an adjudicator to conduct a site inspection will not necessarily give rise to a breach of natural justice, and sets out some general principles relevant to applications for an extension of time to pay a judgment sum and the meaning of indemnity costs when seeking summary enforcement of an adjudicator’s decision.

Mr Justice Akenhead, Queen’s Bench Division, Technology and Construction Court

BACKGROUND

Eaves Limited (“Eaves”) employed Gipping Construction Limited (“Gipping”) to build two timber-framed bungalows in Ipswich. Disputes arose over whether the two bungalows were complete and free from defects and whether, and if so, what, sums were due to Gipping. Gipping referred the disputes to an adjudicator who ordered Eaves to pay Gipping the sum of £70,852 (including interest and adjudicator’s fees). Eaves failed to pay, so Gipping sought summary judgment for the purpose of enforcing the adjudicator’s decision.

ISSUES

Eaves argued that:

the adjudicator had breached the rules of natural justice by failing to conduct a site inspection during the adjudication
time for payment of the judgment sum should be extended beyond the usual 14 days
the legal costs claimed by Gipping for the enforcement proceedings should be reduced (while Gipping argued that indemnity costs should be awarded).

DECISION

The Court held:

There was no breach of natural justice. The adjudicator was under no obligation to conduct a site inspection; it was a matter for his discretion. Adjudication is a necessarily rougher form of justice than a full court or arbitration hearing, and the adjudicator clearly believed in good faith that he had sufficient evidence and argument before him to decide the primary issue in dispute, namely whether the defects complained of were design defects or workmanship defects, without a site inspection.
No extension of time for payment would be made at this point, as there was little or no evidence of inability to pay and the Court felt this was a case where the parties should first discuss the matter between themselves. The Court gave permission to Eaves to apply for an extension at a later time (provided such application was made before the 14 days period for payment expired) in the event that discussions broke down, but observed that such application was unlikely to be viewed sympathetically unless at least some money had first been paid on account of the judgment. Given the frequency with which the issue arose, the Court took the opportunity to outline some general principles for extensions of time to pay a judgment sum:

The Court has absolute discretion to award or refuse an extension to the 14 day period for payment.
An application for an extension of this period must be supported by proper evidence.
It is preferable, where there is a genuine problem about the defendant paying, for the parties to first discuss and attempt to agree the matter on a without prejudice or even an open basis. The Court should only consider an alternative longer period where the parties are unable to agree.
Mere inability to pay is unlikely to justify an extension: an insolvent debtor must take the usual consequences of its insolvency.

Where there is no real defence to a summary enforcement application, the claimant should be awarded its costs on an indemnity basis. Where this basis for the assessment of costs applies, the onus is on the defendant to show that elements of the bill were unreasonable. In this case, there were several respects in which Eaves had established that the costs claimed by Gipping were unreasonable: firstly, Gipping’s solicitors had delayed service of court documentation, leaving Eaves with inadequate time to instruct solicitors and giving rise to an adjournment of the first hearing; secondly Gipping’s solicitors had spent an excessive time working on the documents in what was essentially a simple dispute.

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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