Lead Forensics
Prettys Solicitors Ipswich



Cost recovery in adjudication

September 2017 - Issue 97

The case of Lulu Construction v Mulalley v Co Limited [2016] EWHC 1852, provided hope that the courts would become more likely to allow recovery of adjudication costs. In this case, legal costs of the other side were awarded, however it was widely criticised for being contra to Section 108A of the Housing Grants, Construction and Regeneration Act 1996. Section 108A of the Housing Grants, Construction and Regeneration Act 1996 says that recovery of legal costs is not permitted in an adjudication unless there is an expressly written agreement. The Technology and Construction Court has further reinforced this in two further cases which suggest the court is not willing to award recovery of adjudication costs.

In the case of Lulu Construction the adjudicator awarded the recovery of the other side’s costs due to section 5A of the Late Payment of Commercial Debts (Interest) Act 1998 as this allows reasonable costs to be awarded for debt recovery. However, two more recent cases suggest that costs are not recoverable, these are;

In summary, these cases suggest that recovering costs in an adjudication is very unlikely unless there is a substantial change made to the law. Parties to a contract must ensure that if they want adjudication costs to be recoverable, should a dispute arise, it must be expressly written into their agreement. If a written agreement is to be enforceable it must give the adjudicator full discretion on whom is to reimburse whom.

Adjudications are used in dispute resolution as they are a quick and cost-effective means of dispute resolution. Therefore, it is not likely we will see a change in the future of adjudication costs being recoverable as this would go against one of the main aims of adjudications.

These cases are a reminder to clearly draft terms and to ensure that if you want costs to be recoverable in an adjudication that this is expressly agreed at the outset between both parties in a valid contract.




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