Adjudication costs – an update

Adjudication costs – an update

With the great British washout summer drawing to a close, it appears that the Technology and Construction Court (TCC) has decided that Lulu has caught a late summer cold and has nothing further to shout about.

For those who are not familiar, late last year the TCC in Lulu Construction  upheld an adjudicator’s decision to award legal costs to a successful adjudication party under the Late Payment of Commercial Debts (Interest) Act 1998 (the Late Payment Act). This appeared (it was never fully clear) to create a loop hole whereby a party could claim the cost of a debt based  adjudication if the contractual interest rate did not provide an ‘adequate remedy’. This was in stark contrast to the original intention of adjudication, namely that a party is required to bear its own cost of the adjudication process as set out in s.108A of the Housing, Grants, Construction and Regeneration Act 1996 as amended (the Construction Act). For more information, click here.

The TCC has recently however provided some much needed guidance on the recovery of adjudication costs in Enviroflow Management Ltd v Redhill Works (Nottingham) Ltd. The case itself was fairly humdrum whereby a sub-contractor adjudicated for overdue sums which it was owed along with its reasonable costs for bringing the adjudication. The adjudicator duly obliged, awarding £81,000 to the sub-contractor plus costs of £14,900. The Contractor challenged the decision before the TCC.

The Court upheld the award of the principal sum, but found that the adjudicator had no jurisdiction to award costs under the Late Payment Act. The Court held that s.108A of the Construction Act effectively took precedence over the Late Payment Act and that as such costs of adjudication could not be recovered, save when they fell within the two very narrow exceptions contained within s.108A.

Therefore, whilst the potentially bonus windfall of adjudication costs has now been blown out of sight, it does give all parties involved with adjudication certainty that cost awards are now most definitely outside of the jurisdiction of adjudicators.

If you would like to discuss the adjudication process in further detail, please contact our Construction & Engineering Team on 01392 688688.