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Are the costs of adjudication recoverable?

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Posted on 05 October 2019

The title of this article may seem strange. The general consensus has been that the costs a party incurs in preparing and pursuing its claim in adjudication are not recoverable. However, a recent court case has led some to claim that costs are recoverable.

The case in question was dealt with by the court in March earlier this year, but the judgment has only very recently been released. The case in question is Lulu Construction Limited v Mulalley & Co Ltd. The case concerned the enforcement of an adjudicator’s decision. The unusual feature of that adjudication was that the adjudicator had awarded the successful party its “debt recovery costs” of circa £48,000. These had been claimed under the Late Payment of Commercial Debts (Interest) Act 1998 (“the Late Payment Act”).

When the matter got to court for enforcement, the Deputy High Court Judge dealing with that case enforced the adjudicator’s decision, on the basis that the adjudicator had jurisdiction to award the debt recovery costs in question which had been claimed under the Late Payment Act. It is that finding that has led some commentators to suggest that it is authority for costs being recoverable in adjudication. That of course would be completely at odds with the Construction Act.

It is suggested however that such conclusions go too far. The brief judgment in that case does not say that such costs are, as a matter of law, recoverable. Neither is that point, as a question of principle, dealt with at all in the judgement.

All the judge in that case was concerned with was whether the adjudicator had jurisdiction to act as the adjudicator. The courts have made very clear over the years that an adjudicator’s decision will be enforced even if he is obviously wrong, whether on matters of law or on matters of fact. The issue here, the recoverability of costs, is a point of law. It is suggested, with respect, that the adjudicator got this point wrong. But at the enforcement stage that issue is irrelevant. Provided, as the judge in that case found, the adjudicator had jurisdiction to act as adjudicator, then the courts will enforce his decision even if he got the law plainly wrong. For that reason, it is suggested that the Lulu case should not be relied on as authority to the effect that costs in adjudication are recoverable.

It is nevertheless anticipated that sooner or later the court will give clarification on this point. The Construction Act was, of course, only recently amended, and that would have been an opportunity for the legal draftsmen to address the Late Payment Act, had it been considered that costs were recoverable in adjudication.

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