Sleaford Building Services Ltd (“Sleaford”) is a company specialising in mechanical, electrical and plumbing works and was engaged as a subcontractor by Amey Defence Services Ltd, the main contractor, on a project for the execution of maintenance and construction works for the Ministry of Defence in Suffolk. 

In February 2021, Sleaford engaged Isoplus Piping Systems Ltd (“Isoplus”) as its subcontractor, a specialist pipework contractor. The form of subcontract was the NEC3 Engineering and Construction Short Subcontract subject to bespoke amendments, the total of the work was £1,060,300.40. In November 2022, Sleaford issued notice of adjudication and alleged that Isoplus had installed incorrect fittings causing a catastrophic failure, which meant that Sleaford had to be on site for longer and non-completion caused loss and expense. In short, one of the redresses sought were whether Sleaford should make payment to Isoplus or whether Isoplus should make payment to Sleaford. The adjudicator decided that Sleaford should make payment to Isoplus in the sum of £323,502.32. 

Following the adjudicators decision in December 2022, Isoplus wrote to Sleaford requesting payment for £323,502.32. Sleaford wrote to Isoplus and informed them it was their intention to issue Part 8 proceedings for declaratory relief including that the adjudicator’s decision should not be enforced. Isoplus made an offer to settle under CPR Part 36 (the “Offer”) for the amount awarded by the adjudicator. Sleaford made no response to the Offer and instead issued Part 8 proceedings. 

On 28 April 2023, Mr Alexander Nissen KC handed down a judgment and concluded that there was a judgment on the Part 7 claim in the sum of £323,505.32, plus interest, therefore the sum awarded by the Court was £326,586.60. The judge dismissed the Part 8 claim. 

In the July 2023 judgment, Mr Nissen KC had to consider two consequential issues relating to costs:

1. Whether Isoplus was entitled to enhanced interest, indemnity costs and an additional amount compromising 10% of its claim, pursuant to CPR r.36.17(4). Isoplus maintained they were entitled because they recovered more than the Offer to settle. 
2. What costs order should otherwise be made in respect of the Part 7 proceedings and whether Sleaford should, in any event, be liable to pay costs on an indemnity basis irrespective of the Offer. 

The judge refused indemnity costs and an increased rate of interest from the date on which the Offer expired, plus 10% uplift on the amount of damages awarded. This was on the basis it would be unjust because the Offer was not a genuine attempt to settle the proceedings, but merely the amount the adjudicator decided. That was not much of a concession at all in circumstances where adjudication enforcement tends to produce an all or nothing outcome save in severance cases. As such, all that Isoplus was willing to forego was the interest for a short period. The Judge noted that, at the date of the offer, the interest was 0.1% of the claim and so, accordingly, the offer was to accept payment of 99.99% of the claim. Therefore, it would be highly unjust to make the order sought by Isoplus.

Another interesting point to note was that the judge mentioned it was a “classic case in which indemnity costs should be awarded” because there never was a defence to the claim for enforcement. An interesting point to note is that the judge did not regard the two cases relied upon by Isoplus1 as demonstrating a new approach. The judge stated the cases “rightly recognise, albeit in pithy statements, that in many cases of adjudication enforcement, there really never was a defence and to argue otherwise if often hopeless and lacks reality.” 

That said, the Judge did consider that this case was suitable for indemnity costs in any event in relation to the enforcement proceedings. 

• 1. Croda Europe Ltd v Optimus Services Limited [2021] EWHC 2606 and Bravejoin Company Ltd v Propserity Moseley Street Ltd [2021] EWHC 3598