Lulu Construction Ltd v Mulalley & Co Ltd

Factual and Procedural Background

This opinion concerns an application under Part 24 of the Civil Procedure Rules to enforce the unpaid portion of an Adjudicator's decision dated 12th August 2015, corrected on 17th August 2015. The Adjudicator ordered the Defendant to pay the Plaintiff £240,324.77 within seven days. The Defendant paid £182,863.80, leaving an outstanding balance of £57,460.97 at the time the Particulars of Claim were issued. This balance comprised accrued interest (plus continuing interest at a daily rate) and debt recovery costs of £47,666.27.

The Plaintiff accepted the interest element was due but disputed the debt recovery costs, arguing the Adjudicator lacked jurisdiction to decide on those costs because they were not part of the original dispute referred to adjudication. The Defendant contended the claim for debt recovery costs was properly before the Adjudicator and that any jurisdictional objection was waived.

The dispute arose from a contractual claim by the Plaintiff, initially valued at around £1 million, with a Notice of Adjudication issued by the Defendant to determine payments due under a subcontract. The claim for debt recovery costs was first raised in the Rejoinder and met with a jurisdictional objection. The Defendant argued these costs arose under the Late Payment of Commercial Debts (Interest) Act 1998.

Legal Issues Presented

1. Whether the Adjudicator had jurisdiction to decide on the claim for debt recovery costs, given that this claim was not explicitly referred to in the original Notice of Adjudication.
2. Whether the Defendant waived any jurisdictional objection by conduct during the adjudication process.
3. Whether summary judgment should be granted to enforce the unpaid balance, including the debt recovery costs.

Arguments of the Parties

Appellant's Arguments

• The interest element of the outstanding sum was admitted as due.
• The debt recovery costs were disputed on jurisdictional grounds, as the Adjudicator had no authority to decide on claims not included in the original dispute referral.
• The claim for debt recovery costs was not pleaded in the Particulars of Claim and was outside the scope of the adjudication referral.

Appellee's Arguments

• The claim for debt recovery costs was properly referred to the Adjudicator within the broader dispute.
• The debt recovery costs are connected with and ancillary to the referred dispute, as they relate to costs of running the adjudication.
• Any jurisdictional objection was waived by the Plaintiff's conduct during the adjudication process.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Allied P& L Limited and Paradigm Housing Group Limited [2009] EWHC 2890 (TCC)	The scope of an adjudication reference may be broadened by the nature of the defence raised; claims ancillary or connected to the referred dispute may be adjudicated even if not expressly included in the referral.	The court relied on this authority to conclude that the claim for debt recovery costs was sufficiently connected and ancillary to the original dispute to fall within the Adjudicator's jurisdiction.

Court's Reasoning and Analysis

The court analysed the scope of the adjudication reference and the jurisdiction of the Adjudicator to decide on claims not expressly included in the Notice of Adjudication. The court accepted the Plaintiff's admission that the interest element was due but focused on the debt recovery costs claim.

Applying the principles from Allied P& L Limited and Paradigm Housing Group Limited, the court held that the ambit of the adjudication referral can be widened by the nature of the defence or claims connected to the essential dispute. Since the debt recovery costs related directly to the costs of conducting the adjudication initiated by the Defendant, they were connected and ancillary to the referred dispute.

The court rejected the jurisdictional objection, finding that the Adjudicator correctly concluded he had jurisdiction to decide on the debt recovery costs. Regarding the alleged waiver of the jurisdictional objection, the court found that a broad reservation of jurisdiction had been made by the Plaintiff at a meeting, and failure to repeat this reservation in subsequent written submissions did not amount to waiver.

Consequently, summary judgment was granted based on the Defendant's primary argument that the Adjudicator had jurisdiction, while a refusal would have been appropriate had the decision rested solely on the waiver issue.

Holding and Implications

The court GRANTED SUMMARY JUDGMENT in favour of the Defendant to enforce payment of the outstanding balance including the debt recovery costs.

The ruling confirms that an adjudicator's jurisdiction may properly extend to ancillary claims closely connected to the referred dispute, even if not expressly included in the original referral. The decision does not establish new precedent but applies existing principles to confirm the enforceability of such costs in adjudications.