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Adjudication – mind the recovery gap

23 October 2017. Published by Rebecca May, Associate

The end for attempts to recover adjudication costs?

There has been an increase in the past couple of years in parties seeking to recover their costs of adjudication through purported reliance on the Late Payment of Commercial Debts (Interest) Act 1998 (Late Payment Act) with varying degrees of success.  However, O'Farrell J decision to sever an adjudicator's decision as she considered that the adjudicator did not have jurisdiction to award costs under the Late Payment Act in the recent case of Enviroflow Management Ltd v Redhill Works (Nottingham) Ltd (2017) (unreported, 16 August 2017) may just put an end to that trend.

In Enviroflow, the Judge upheld the balance of the award (£81,000), but severed this from the sum of £14,900 which had been claimed by the Referring Party and awarded by the Adjudicator pursuant to the Late Payment Act.

Whilst the decision is unreported, it is understood that the Judge's reasoning was based on the tension between section 5A of the Late Payment Act and section 108A of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA), with s108A HGCRA prevailing.

Section 5A of the Late Payment Act allows a successful party to recover their reasonable costs of recovering a debt. However, s108A HGCRA requires that provision for the recovery of costs in adjudication is only valid if it is agreed in writing after the Notice of Adjudication has been served.

It was common ground in this case that, on the facts, no such agreement had been made and so the Referring Party's attempt to recover its costs was contrary to the HGCRA. In the spirit of adjudication, providing a timely and cost effective solution, and in line with the general rule that parties are responsible for their own costs in adjudication, O'Farrell J gave precedence to the provisions of the HGCRA over the implied right of recovery in the Late Payment Act.