One of the cornerstones of the adjudication scheme under the Construction Act is that the parties must each bear their own costs, whatever the outcome. This is in contrast to court proceedings where, generally speaking, the losing party pays the winning party’s costs.
Construction associate Will Cursham explores recent cases where parties attempted to pass their adjudication costs onto the losing party, and why recovering the costs of an adjudication is very rare.
The idea behind the adjudication scheme is to enable the parties of a disputed construction contract to refer a matter to adjudication without the risk of having to pay the other party’s costs should they lose.
There can be little doubt that adjudication proceedings are much more expensive than they were intended to be when they were introduced by the Construction Act in 1996 – a party’s own costs can be very substantial indeed. So, it is not surprising that several attempts have been made to recover adjudication costs from the other side.
In a recent blog we looked at how one party tried to recover its adjudication costs by claiming them under the Late Payment of Commercial Debts (Interest) Act 1998. However, in that case, the court decided that the costs would only be recoverable under the Late Payment Act in very limited circumstances.
More recently another attempt was made to the recover adjudication costs from another party, this time using Part 36 of the Civil Procedure Rules.
Part 36 provides a formal procedure for parties to make and accept offers to settle cases. It tries to encourage settlement by imposing costs sanctions on parties who fail to accept an offer to settle, and then do no better than the offer when the case comes to trial.
One of the features of an offer under Part 36 is that when a defendant agrees to pay a sum in settlement of a claim (either by accepting a Claimant’s Part 36 offer or making its own), then the claimant will be entitled “to the costs of the proceedings (including their recoverable pre-action costs) up to the date of the acceptance“.
The claimant argued in this case that the costs of two adjudications were “costs of the proceedings”, and so they were entitled to their costs of the adjudication under Part 36.
As clever as this argument might seem, the court did not accept it. In the first place, it did not accept that adjudication costs are “costs of the proceedings”. “Proceedings” mean “court proceedings” and adjudication is a completely separate procedure from court proceedings.
More importantly, however, the court was not going to allow the provisions of the Construction Act to be circumvented.
The message from the courts in respect of adjudication costs is therefore clear: except in very exceptional circumstances, you are very unlikely to be able to recover the costs of an adjudication!
For further information, please contact:
Associate William Cursham
T: 0121 234 0066
 See section 108A of the Housing Grants, Construction and Regeneration Act 1996.
 [Communications to insert link to previous Talking Construction Blog, “Costs from Adjudication”. I think it was published in September.]
 Lulu Construction Limited v Mulalley & Co Limited  EWHC 1852 (TCC).
 CPR 36.13(1).