Since the introduction of adjudication in 1998 for the speedy resolution of construction disputes, it has been widely accepted that successful parties will not normally be able to claim their legal costs of pursuing the claim, even if they are the successful party in the adjudication.
In 2013, the Late Payment of Commercial Debts (Interest) Act 1998 (‘the Late Payment Act‘) was updated with a new section 5(A)(2A) which provides:
‘If the reasonable costs of the supplier in recovering a debt are not met by the fixed sum, the supplier shall also be entitled to a sum equivalent to the difference between the fixed sum and those costs’.
Michelmores have successfully used this relatively new legislation to get around the traditional constraint on costs recovery in adjudication and obtained costs for our client. The situation is generally considered to be anomalous with apparent conflict between two pieces of legislation. The High Court has recently handed down a judgment, dealing with (at least in some respects) this point.
In the recent case of Lulu Construction Limited v Mulalley & Co Limited  EWHC 1853(TCC) (‘Lulu‘), the Claimant contractor sought enforcement of an adjudicator’s decision including the Claimant’s costs of the adjudication.
The Technology and Construction Court held that the adjudicator was entitled to award Lulu their costs and made an order that the damages and costs were to be paid. This appears to provide a judicial precedent entitling a part to claim for the recovery of costs as part of the adjudication process. It is not however a blank cheque for a winning party to recover its costs in all adjudications and the following points are worth bearing in mind:
It is therefore clear that the costs of adjudication will not be recovered in all situations. However this decision highlights that costs can be recovered, albeit in limited circumstances. It is a matter that will obviously need to be pleaded accurately as failure to do so may result in an inability to recover such costs.
If you would like to discuss the adjudication process and the potential of recovering costs please contact our Construction and Engineering Team on 01392 688688