The claimant, Lulu Construction Ltd applied for summary judgment against the defendant, Mulalley & Co Ltd in relation to a contractual claim for payment of an outstanding balance of an adjudicator’s award. The dispute had in fact been referred by Mulalley, as the paying party, in order to determine the value of Lulu’s claim under a subcontract. The defendant agreed to pay a portion of the sums due under the adjudicator’s award, although disputed that it was due to pay the outstanding balance of “debt recovery costs” of £47,666, claimed under the Late Payment Act 1998.

The defendant claimed that the adjudicator had no jurisdiction because the claim in respect of debt recovery costs was not specifically referred to in the initial notice of adjudication but was mentioned for the first time in the rejoinder. The adjudicator determined that he had jurisdiction to consider this element of the claim and awarded the claimant debt recovery costs and interest on the principal sum of £182,863.80. The defendant only paid the principal sum, and consequently the claimant issued enforcement proceedings.

Mr Acton-Davis QC   has enforced an adjudicator’s decision, finding that he had jurisdiction to award the unpaid party its “debt recovery costs” of £47,666, claimed under the Late Payment of Commercial Debts (Interest) Act 1998. In reaching this conclusion, the court looked at the judgment in Allied P&L Ltd v Paradigm Housing Group Ltd [2009] EWHC 2890, where Mr Justice Akenhead considered that  “the ambit of the reference  to … adjudication may unavoidably be widened by the nature of the defence or defences put forward by the defending  party in adjudication or arbitration… it is open to any defendant to raise any defence to the claim when it’s referred to adjudication…”

Also, a dispute referred to adjudication could “include claims for relief which are consequential upon an incidental to it and which enable the dispute, effectively, to be resolved”. This extended to claims for discretionary costs and interest, which were “connected with and ancillary to the referred dispute”.

Mr Acton-Davis  QC  therefore held that the  debt  recovery costs -  being  the costs of running the adjudication - were connected with  and  ancillary to  the referred dispute and must therefore be properly considered part of it. It did not matter that the costs were not referred to in the notice of adjudication, but were included for the first time in a rejoinder because, unusually, the adjudication had been started by the defendant, the paying party, as it wanted to resolve the issue of the value of the sums claimed under the parties’ sub-contract.  Consequently Mr Acton-Davis QC awarded the sums in full to the claimant.

The practical effect of this case is that many unpaid construction parties have been anticipating this court decision to find out whether they can claim their adjudication costs under the Late Payment Act 1998. It is arguable that being able to do so is contrary to Parliament’s intentions under the Housing Grants, Construction and Regeneration Act 1996, which left parties to bear their own costs. It looks like unpaid construction parties may start doing so from now on.

Please note that although the transcript has only just been released in August 2016, the decision was handed down in March 2016 and there appears to be no indication of an appeal.