Article – FPWS Newsletter Summer 2018
Revisiting the Recovery of Professional Fees
Introduction
Party Wall Surveyors often fall into two categories where recovery of fees are concerned: Those who have found themselves not to have been paid in accordance with the terms of the Award, and those who are yet to find themselves in this position.
It is an unfortunate fact of life that at some stage a surveyor, acting upon a statutory appointment, will find himself or herself chasing payment for completed work. This may involve many hours of additional time, where time could be spent on ‘actual’ work. In most cases payment will be eventually met – however, it is a fact that many such cases end up before the Courts.
The Proviso within the Award as to Fees
It is common practice to include an explicit term for payment of a surveyor(s) fees within a Party Wall Award, whether acting as an agreed surveyor, for both surveyors, or for the third surveyor’s fees. This may also extend to the fees payable to other specialists, for example structural engineers. The purpose of doing so is to provide for recovery under section 17 of the Party Wall etc. Act 1996 (‘the Act’), as there may be no contract for example between a Building Owner and Adjoining Owner’s Surveyor. The section provides as follows:
‘Any sum payable in pursuance of this Act (otherwise than by way of fine) shall be recoverable summarily as a civil debt.’
As we are aware fees, of course, must be reasonable as ‘costs’. These are usually agreed by the surveyors to be included within the Award, or sensibly determined by a third surveyor, paragraphs 7.5 and 7.5.1 of RICS Guidance Note (Party Wall Legislation and Procedure, 6th edition) provides guidance as to the same. If costs are not reasonable they are subject to challenge, ordinarily by way of appeal, with potential risk against the surveyor if joined and the surveyor’s costs found to be ‘unreasonable’.
Recovery of Fees – The Magistrates’ Court
As the Faculty’s Guidance Note (23rd June 2010, Mr Stuart Frame) states, the summary procedure is recognised as the main route of recovery and the Magistrates Court is the forum for such an action, as also confirmed in Farrs Lane Developments Ltd v Bristol Magistrates Court [2016] EWHC 982.
The Magistrates’ Court is a ‘creature of statute’; relevant powers are conferred by Parliament under the Magistrates’ Court Act 1980. The Magistrates, or District Judge, have the power to make an order on Complaint for the payment of money recoverable summarily as a Civil Debt under section 58 of the MCA 1980. The Court also has the power to award costs (in its discretion) either as against the Defendant, or in his/her favour if the ‘Complaint’ is dismissed. Such costs are to be ‘just and reasonable’.
The Court also requires there to be a Complaint made to the Court and a Summons issued as against the Defendant(s). This initial procedure, as to the making of a ‘Complaint’, has a 6-month limitation period arising from when the matter of complaint arose under s.127 of the MCA 1980. This period may well commence the first day after the sum claimed becomes payable. There is a fatal procedural difficulty if the date is missed; reliance as to the recovery of owed fees may well thereafter rest in the jurisdiction of the County Court.
For those who have either practiced, or appeared, before the Magistrates Court upon such a complaint being made, it is fair to say that the Act and its procedures are unfamiliar to both Magistrates and the Justices’ clerk(s) who advise within those Courts, despite the efforts of the Faculty (FPWS Guidance Note appendices). What therefore may be thought of as a simple procedure may well result in legal technicalities having to be explained as well as a potential Trial of issues (that may or may not be required or even be procedurally correct).
There are also practical difficulties in issuing in the Magistrates Court with regards to the question as to what occurs in relation to enforcement if the Defendant(s) does not pay, or if there is an order by way of instalments that results in unacceptable delay in payment or subsequent enforcement issues? If there is no payment or a breach of the terms of payment then enforcement of the Order of the court comes by way of a Warrant of Control for the purpose of recovering the sum under section 76 – and despite a perceived conflict between sections 96 and 92 of the MCA 1980 (not rehearsed), it is apparent that there is no right to seek imprisonment for default.
The effect of the Magistrates’ Order is then limited, to either payment outright, payment by instalments or through enforcement under effectively through a ‘Warrant of Control’. A Warrant of Control authorises Enforcement Agents to visit the defaulter’s home address in order to either (a) collect money or (b) remove goods in order to sell. As a route to recovery it may be fraught with difficulty in either realisation or it may present procedural difficulties.
It is of note that arguably the most useful of enforcement method procedures however cannot be utilised when dealing with the Magistrates’ Court. The route known as a ‘Charging Order’ provides a useful remedy where an Order to make payment of sums owed is breached. The remedy is available for our purposes via the County Court under section 1 of the Charging Orders Act 1979; however, it may only follow an Order granted to the Claimant in the County Court jurisdiction.
Recovery of Fees – The County Court
Although there is the mandatory use of the language within section 17 of the Act (‘shall’) it is not thought that this is intended to exclude the jurisdiction of the County Court in favour of the Magistrates Court, see for example discussion in Party Walls (Law and Practice) 4th edition (Bickford-Smith, Nicholls & Smith). Indeed, the wording of section 17 does not exclusively cite that a ‘sum payable’ should only proceed by way of the Magistrates’ Court, it is silent as to venue and jurisdiction.
In support of the above proposition, and despite an examination of the terminology (‘recoverable summarily as a civil debt’) used within the Act, which is quite clearly similar to that used in sections 58 and 150 of the MCA 1980, it is this author’s view that any claim for sums payable are not solely restricted to the Magistrates’ Court but also extend to the County Court by virtue of its inherent power and suitability – notwithstanding the premise that section 16 of the County Court Act 1984 may be read widely for both sides arguing a point under s.16(1)(a) of the same. It is the opinion of this author that the inclusion of the word ‘only’ within section 16(1)(a) of the CCA 1984 (‘…shall only be recoverable summarily;’) allows the County Court jurisdiction to hear such a claim.
It is therefore open for a potential ‘Claimant’ Party Wall Surveyor, or one who is owed sums under the Act, to bring a claim for payment under what is known as Part 7 of the Civil Procedure Rules (‘CPRs’), or Part 8 of the same. Part 7 of the CPRs provides a procedure where it is expected that the claim may be contested. Equally, Part 8 may be used for example where there is no dispute as to fact, or where the matter concerns a point of law or construction of a document.
It is the opinion of this author that either CPR route could be utilised; especially where the 6-month limitation period of a Magistrates’ Court action has passed. Where an Award has not been challenged by way of an Appeal under s.10(17) of the Act, and where the Award is ‘conclusive’ under a.10(16) (so long as it is intra vires) and not open to challenge, it is to open to use either procedure arguably, but for the purposes of a straight-forward money claim Part 7 and the Money Claims On-Line procedure may be more efficient (‘MCOL’).
There are advantages however in using the Part 8 procedure in that this procedure (i) does not have the 6- month time limit as in the Magistrates Court – as with a Part 7 claim also (ii) the first hearing of the matter is most likely to be the last hearing (iii) the procedure does not require particulars of claim or a defence and is expeditious (iv) the court is well versed and experienced in dealing with similar, or such, claims (v) experienced Judges are likely to hear the case and decide the matter summarily and (vi) the matter is likely to be determined on the papers before the Court without the requirement to provide oral evidence as to disputes of fact (vii) no counterclaim is usually open to a Defendant. However, judgement in default of a defence cannot be applied for nor can the claim be issued electronically.
The claim would be expected to be settled at the first hearing upon the Court being presented with a completed Form N208 claim form and witness statement from the Claimant.
The advantages of Part 7 include the following: (i) accessibility is online (ii) an application can be made for judgment online (iii) the procedure is designed for small to mid sized money claims (iii) interest can be claimed (iv) the case may well be ‘hearing free’ (iv) if contested the claim may be allocated to the small claims track, or potentially in the future by an ‘online’ court. However, legal costs may be non-recoverable if allocated to the ‘small-claims’ track and the claim may be subject to an opportunity to dispute and/or be subject to a counterclaim.
In light of these two competing routes it is more expedient (and appropriate as a claim for money) to issue through the MCOL Part 7 procedure and is the recommended route as an alternative to the Magistrates Court procedure. This route also allows for further methods of ‘Enforcement’, including my own recommended method, which is through a ‘Charging Order’ where payment is not forthcoming after Judgment, or a term of payment has been breached.
Obtaining a ‘Charging Order’ after Judgment
In a small minority of cases a Court Order may have little effect in securing payment. Enforcement of the Judgment is therefore advisable – a Charging Order is one means of enforcement that is suitable to debt owed by a ‘Building Owner(s)’.
The advantage of this remedy is twofold. First, it is a charge against property and therefore security; and secondly, payment of the whole sum (with interest) at some stage is almost a certainty. In contrast where a Warrant of Control is concerned there may be uncertainty as to ‘sending in the bailiffs’, or as to investigating the Defendant(s) means. Where we are dealing with a Party Wall Award however there is one thing we have knowledge of – the Defendant(s) as ‘Building Owner’ who has decided not to pay, or cannot pay, holds title of the subject property which is an ‘asset’ or ‘capital’. The building, which may have to be re-mortgaged by the Defendant at some stage as a capital asset, cannot be usually sold without the discharge of an outstanding ‘charge’ upon it. Further, the Claimant creditor may apply for an ‘Order for Sale’ if payment is not forthcoming. As can be seen therefore, the debt is likely to be paid (with interest) and recovery of the debt is almost certain.
The process itself is a two-stage one, and at the second stage (after the grant of an Interim Charging Order) a District Judge, or Deputy District Judge will make the Order final – the Court does however retain a discretion to decide the Orders sought. A Charging Order should also be recorded and protected with the Land Registry by way of Notice or Restriction (Practice Guides 19, 29, 63, 76 Land Registry). Interest will continue to run from date of judgment to final payment of money also. If payment is not made – the ultimate sanction is that the Claimant can apply for an ‘Order for Sale’ the subject building, so as to realise the debt owed.
Conclusion
A failure to make payment of sums due will result in additional work in chasing the debt. However, ultimately it may be at their own cost, whether in the Magistrates’ Court or County Court, particularly where provision for such eventualities has been taken into account in the careful wording of the Award.
As a result of such proceedings (if in the County Court) it is advisable in the event of non-payment of a Judgment debt, or indeed to secure the debt, to obtain a Charging Order. Such an order will have the effect of providing security as well as an incentive for the Defendant(s) to pay the debt with interest.
Shaw Kelly