The prolific singer and songwriter George Michael – who continues to release new music posthumously following his untimely death Last Christmas – was a big fan of the concept of Freedom. It was a theme about which he wrote early in his career (with Wham!) and to which he returned as a solo artist with “Freedom ’90”. He also tried (unsuccessfully) to gain Freedom from his record company in the early 1990s.
You may find it Amazing how tenuous a link that is to the theme of a construction law blog, but the subject of Freedom came up recently in two separate judgments from the Technology and Construction Court. The first concerned a referring party’s Freedom to stop and restart adjudication proceedings (and the consequences of those actions), and the second the principle of Freedom of contract in the context of how parties agreed concurrent delay would be treated. Nothing Too Funky, but interesting decisions all the same. Jeremy looked at these two cases in Dispatch recently (see Jacobs UK Ltd v Skanska Construction UK Ltd and North Midland Building Ltd v Cyden Homes Ltd) but I wanted to try Spinning the Wheel over my next two blogs with my own thoughts on these cases, starting here with Jacobs UK Limited v. Skanska Construction UK Limited.
" What was surprising to me was the finding that Skanska was held responsible for Jacobs’ wasted costs, as costs are not normally awarded in adjudications unless an express agreement to do so has been entered into after the adjudication has started. "
Jacobs v. Skanska and serial adjudications
In Jacobs Mrs Justice O’Farrell upheld a party’s Freedom to withdraw from an adjudication which it had commenced and to start a subsequent adjudication dealing with substantially the same dispute. She also found, however, that there were costs consequences which flowed from doing so.
Jacobs sought an injunction to prevent Skanska from starting a second adjudication after it withdrew from the first due to its inability to prepare a reply within the agreed timescales as its counsel became unavailable. Jacobs also sought its wasted costs of preparing the response in the abandoned adjudication.
Mrs Justice O’Farrell upheld the right of a referring party to withdraw an adjudication it had commenced. There is authority dating back to 2006 confirming this right. The Judge said that she had the power to grant an injunction restraining a second adjudication if in her judgment that second adjudication was unreasonable and oppressive, but she found that whilst Skanska had acted unreasonably in withdrawing the adjudication as it was unable to prepare a reply because its counsel became unavailable, its conduct was not also oppressive. This was because Jacobs was able to use much of its work on the response in the first adjudication for the second adjudication and the inconvenience Jacobs would suffer was not sufficient to justify granting an injunction.
The decision on Jacobs’ claim for costs is interesting. The parties had entered into an adjudication agreement which covered the identity of the adjudicator, the procedure to be followed and the timetable. Mrs Justice O’Farrell found that this went further than an agreement to follow the usual Scheme timetable or a timetable directed by an adjudicator and Skanska’s withdrawal from the adjudication was a breach of that agreement, which entitled Jacobs to its wasted costs by way of damages for breach. The Judge also found that, alternatively, it was reasonable and necessary to imply a term into the agreement that if one party decided to ignore the agreement, it would pay the other’s wasted costs. The Judge did stress that the true wasted costs would be limited, as Jacobs could use much of its work on the response issued in the first adjudication when it came to the second adjudication.
The finding that a referring party was free to abandon an adjudication it had commenced and start a second adjudication on substantially the same dispute was, in my view, unsurprising given the authority on the point. What was surprising to me was the finding that Skanska was held responsible for Jacobs’ wasted costs, as costs are not normally awarded in adjudications unless an express agreement to do so has been entered into after the adjudication has started.
The key factor in my view was the existence of the wider agreement and the finding that Skanska had breached it, giving rise to the claim for damages for breach by way of wasted costs. I do not think claims for wasted costs in adjudications without such agreements will flow from the decision in Jacobs. I am sure, however, that in similar circumstances some responding parties will try to recover their costs. We will all be Waiting for That Day when the TCC gives judgment in such a case.
If you have comments on this blog or the case discussed, please leave a comment or a Careless Whisper in the box below.