Court confirms the late payment legislation does not provide automatic entitlement to costs in adjudication

Winding up petitions rarely appropriate to recover sums due under a construction contract

There has been some debate as to whether or not legal costs incurred in pursuing debt claims in adjudication might be recoverable under the Late Payment of Commercial Debts Interest Act 1998.

In an article published last year, I counseled against any assumption that the late payment legislation entitles a party to seek the costs of pursuing a debt claim through adjudication. This was because an entitlement to claim costs under the late payment legislation only operates as an implied term, it does not fulfil the requirements of S108A of the Housing Grants Construction & Regeneration Act 1996, most obviously because it is not in writing.

In a judgment that has just been published in the case of Enviroflow Management Limited –v- Redhill Works (Nottingham) Limited [2017] EWHC 2159 (TCC), the court has held that the legal costs of pursuing a debt claim in adjudication were not recoverable, for the reasons stated above. It is the first time that a judgment of the High Court has considered the question. The judgment arose where an adjudicator had as part of his decision awarded costs pursuant to the late payment legislation. The Defendant resisted enforcement of the decision on the basis that the adjudicator had no jurisdiction to award costs.

For an adjudicator to award legal costs there must be a written contractual provision conferring on the adjudicator the power to do so or there must be a written agreement by the parties to that effect made after the giving of notice to refer the dispute to adjudication. Relying on the terms implied by the late payment legislation will not suffice.

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Michael Frisby

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