Enviroflow Management Ltd v Redhill Works (Nottingham) Ltd

16 August 2017 - Westlaw

This was an adjudication enforcement case which came before Mrs Justice O’Farrell. The adjudicator awarded the claimant £81,000 plus interest, as well as its reasonable costs of recovering the debt plus VAT of £14,900, and adjudication fees. The principal claim was enforced. However, the claim for costs was dismissed and that part of the adjudicator’s decision was severed.

Details of the case are brief, because there is not, as yet, a formal judgment and there may not be one, but it is clearly an important point of principle.

From the case note, it would appear that the Judge was influenced by the fact that the claim for costs was based on an implied term. Following the amendments made in 2013 to the Late Payment of Commercial Debts (Interest) Act 1998, it had been suggested that a party may be able to recover the costs incurred during an adjudication where payment was sought. Specifically, section 5A of the Late Payment Act provided for an implied term in a contract that a successful party was entitled to its costs of recovering a debt. In contrast, section 108A of the HGCRA as amended provides that where a construction contract has been referred to adjudication, the costs of an adjudication can only be awarded where such a provision has been made in writing.

The Judge agreed that in accordance with the principles of the Late Payment Act, Enviroflow was entitled to seek its reasonable costs by reason of the implied term. However, following section 108A of the HGCRA, that term would be ineffective unless an agreement had been made in writing. In other words, the specific requirements of the HGCRA that any agreement providing for the payment of costs had to be in writing took precedence.

Here, it was apparently common ground that no agreement had been made in writing. Therefore the adjudicator did not have jurisdiction to make a costs award and that part of his decision was not enforced.

This Decision is therefore in line with the spirit of Mr Justice Coulson’s decision from the end of last year in the case of WES Futures Ltd v Allen Wilson Construction Ltd (Issue 196) where he noted that in “an ordinary case”, a party seeking to recover a sum awarded by an adjudicator is not entitled to (and cannot seek) the legal costs it incurred in the adjudication itself. That was because, pursuant to the Housing Grants Act, as amended, costs incurred in adjudications are not recoverable:

“… if a successful party cannot recover its costs in the adjudication itself, it cannot recover them in enforcement proceedings either”.

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