The claimant, WES Futures, had carried out sub-contract works for the defendant, Allen Wilson Construction Ltd, at a building in London. The dispute between the parties concerned unpaid invoices and was referred to adjudication. The adjudication had been commenced but had not been concluded because the adjudicator resigned on jurisdictional grounds.

The claimant's solicitors put a "Without Prejudice Part 36 Offer" to the defendant, stating that the claimant would accept £65,000 plus VAT in full and final settlement of its claim. The letter stated: "If this offer is accepted at a point which is more than 21 days from the date of this offer you will be liable for all our client's legal costs incurred in this case". No sums were paid and in August 2016 the claimant began the second adjudication.

The adjudicator upheld its claim for £86,469.21 plus VAT. The defendant refused to pay, so in October 2016 the claimant began adjudication enforcement proceedings. In November, the defendant accepted the Part 36 offer and the parties accepted that a binding compromise had been reached.

The issue was the costs consequences of the compromise. The claimant, who wished to recover the costs of the adjudications, argued that its offer did not comply with CPR 36.13(4)(b) and 36.13(5), as it purported to exclude the court's power to determine liability for costs in circumstances where the offer was accepted after the 21 days and therefore precluded the court from deciding what was just in the particular circumstances of the case.

Coulson J held that the claimant's offer was a valid Part 36 offer. However, as the letter made no reference to adjudication costs, the "costs of proceedings" (rule 36.13(1)) did not cover them. In reaching this conclusion, the court applied the Court of Appeal's guidance in Dutton and others v Minards and others [2015] EWCA Civ 984 and C v D [2011] EWCA Civ 64.

There were also two wider principles which militated against the claimant's interpretation of the February letter. Firstly, “a party seeking to recover a sum awarded by an adjudicator is not entitled to … the legal costs it incurred in the adjudication itself. That is because, pursuant to the Housing Grants (Construction and Regeneration) Act 1996, as amended, costs incurred in adjudications are not recoverable. So if a successful party cannot recover its costs in the adjudication itself, it cannot recover them in enforcement proceedings either”.

And secondly, recoverable pre-action costs do not normally include the costs of separate, stand-alone ADR proceedings such as adjudication. Coulson J held that “in the case of Roundstone Nurseries Limited v. Stevenson Holdings Limited [2009] EWHC 1431 (TCC) that principle was restated, albeit that the particular costs under review in that case were again the costs of a mediation rather than an adjudication. However, in my judgment, the same principles apply.”

Interestingly, the court also considered what the position would be if the offer was not a Part 36 offer. In those circumstances, the claimant was still unable to recover its adjudication costs because "all [the claimant's] legal costs incurred in this case" related to "imminent court proceedings". It could not be construed to include past or future adjudication costs.