Lulu Construction Ltd v Mulalley & Co Ltd

[2016] EWHC 1852 (TCC)

The question for Deputy Judge Acton-Davies QC was whether or not the adjudicator had jurisdiction to make an award in favour of Lulu of what were described as “debt recovery costs” of £48k. The reason this was an issue was because the claim was not specifically referred to in the Notice of Adjudication, or in the Referral Notice, or in the Response. It was only pleaded, for the first time, in the Rejoinder. The reason for this somewhat unusual state of affairs was that the adjudication was brought by Mulalley, effectively the paying party who wanted to resolve the value of Lulu’s claim under the subcontract. As the Judge noted, it was therefore “hardly surprising” that the claim for debt recovery costs was not referred to in the Notice of Adjudication.  Mulalley’s position was that the head of claim was not within the scope of the Referral and the claim was not something which could be run as what might be called a defence.

The Judge accepted that the issue was not within the wording of the Dispute referred. Mulalley’s concern was to try to sort out the payments due under the subcontract, although the Notice did also refer to such other sums as the Adjudicator may decide. Lulu relied upon the decision of Mr Justice Akenhead in Allied P&L Ltd v Paradigm Housing Group Ltd where the Judge said this: 

“The ambit of the reference to arbitration or adjudication may unavoidably be widened by the nature of the defence or defences put forward by the defending party in adjudication or arbitration … In my view, one should look at the essential claim which has been made and the fact it has been challenged as opposed to the precise grounds upon which it had been rejected or not accepted. Thus, it is open to any defendant to raise any defence to the claim when it’s referred to adjudication…

“It follows from the above that if the basic claim, assertion or position has been put forward by one party and the other disputes it, the dispute referred to adjudication will or may include claims for relief which are consequential upon an incidental to it and which enable the dispute, effectively, to be resolved. The key question is: is it so connected with and ancillary to the referred dispute as properly to be considered as part of it? There must be limits to this which can be determined by analysing what the essential dispute referred is.”

The Judge considered that the costs claimed were clearly connected with and ancillary to the referred dispute and therefore must properly be considered part of it. This meant that the Adjudicator was correct to say that he had jurisdiction to decide this element of the dispute; although it was not within the scope of the referral, it was something which was connected with and ancillary to that referred dispute. To be clear, the Judge did not say that the Adjudicator was correct, simply that he had jurisdiction to consider the claim and make a decision on it. Given the unusual nature of this adjudication, it was possible for a claim which was not part of the Adjudication Notice to fall within the issues which the adjudicator had jurisdiction to decide.

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