The defendant contractor, Redhill sub-contracted part of the works to the claimant, Enviroflow. This case reviewed a claim for adjudication costs under the Late Payment of Commercial Debts (Interest) Act 1998.

A dispute arose as to payment and the claimant commenced an adjudication seeking an order for payment as well as its reasonable costs in recovering payment under the Late Payment Act. The adjudicator accepted the claim and ordered the defendant to pay £81,000 plus interest, as well as its “reasonable costs” of recovering the debt (some £14,900) under the Late Payment Act and his own fees and expenses incurred in the adjudication. The claimant applied to enforce an adjudication decision by summary judgment.

In the enforcement proceedings, one of the issues was who the parties to the sub-contract were and whether the adjudicator had jurisdiction to award the claimant its costs of the adjudication.

On the question of the sub-contract existence, O’Farrell J held that although the works had begun without a binding contract in place, the claimant and the defendant were the parties to the sub-contract and not the claimant’s sister company, X, as the defendant had argued. As the result, the adjudicator had had jurisdiction to determine the payment disputes referred to him.

The reasoning behind it was that overall it was clear that the parties' intention had been to engage the claimant. Instructions were issued to the claimant and signed off by the defendant and the claimant submitted invoices to the defendant, the payment had been made to the claimant and at no point had the defendant objected. Further, the defendant issued the letter of claim where he referred to a sub-contract between the defendant and the claimant. Although the defendant had attempted to retract the contents of that letter, it was admissible evidence as to what had been intended in 2016.

On the question of costs, O’Farrell J noted that section 5A of the Late Payment Act 1998 provides that a successful party is entitled to its costs of recovering a debt and section 108A of the Construction Act 1996 provides that the costs of an adjudication can only be awarded where such a provision had been made in writing. On the facts, as there was no agreement in writing, it meant the adjudicator lacked jurisdiction to make a costs award. O’Farrell J severed the adjudicator’s decision and just ordered summary judgment on the £81,000 plus interest.

This decision served a useful reminder for practitioners that parties wishing to recover adjudication costs will now be limited to the two narrow categories. Any contractual provision in a construction contract dealing with the allocation of adjudication costs between the parties has to be made in writing after service of a Notice of Adjudication or if made in advance, is limited to conferring power on the adjudicator to allocate his fees and expenses as between the parties. This case should put an end to claims for adjudication costs under the Late Payment Act, unless the matter comes before the Court of Appeal.