Lulu Construction Ltd v Mulalley & Co Ltd

The scope of an adjudication reference may extend beyond the precise wording of the notice. A defence may widen the ambit of the dispute where it responds to the essential claim referred. Claims for relief that are consequential upon, or connected with and ancillary to, that dispute may also fall within the adjudicator’s jurisdiction. The court must identify the essential dispute and impose limits by analysing its substance. Debt recovery costs incurred in the adjudication may therefore be within the reference, even if not expressly pleaded in the notice, referral or response.

Lulu Construction sought summary judgment to enforce the unpaid balance of an adjudicator’s decision requiring Mulalley to pay sums due under a subcontract. The disputed balance included interest and debt recovery costs claimed under sections 1(1) and 5A(3) of the Late Payment of Commercial Debts (Interest) Act 1998.

The costs claim was first raised in Lulu’s rejoinder during the adjudication. Mulalley objected that it fell outside the referred dispute and had not been pleaded in the enforcement proceedings. Lulu relied on an alleged ad hoc submission to jurisdiction and on the claim’s connection with the adjudication dispute.

1. Summary judgment granted. The claimant was entitled to enforce the adjudicator’s decision, including the debt recovery costs.
2. The debt recovery costs were not within the precise wording of the Notice of Adjudication. The notice, however, referred the dispute concerning payments due under the subcontract, and expressly included such other sums as the adjudicator might decide.
3. Following the principles stated by Akenhead J in Allied P&L Ltd v Paradigm Housing Group Ltd [2009] EWHC 2890 (TCC), the ambit of a reference may be widened by the defending party’s response. The court must examine the essential claim and the fact that it has been challenged, rather than the precise grounds of rejection.
4. Claims for relief consequential upon, incidental to, and sufficiently connected with the essential dispute may be included where they enable the dispute to be resolved. The present costs were incurred in conducting the adjudication instituted by Mulalley’s notice. They were therefore clearly connected with and ancillary to the referred dispute, and the adjudicator had jurisdiction to determine them.
5. Mulalley had broadly reserved its jurisdiction objection at a meeting with the adjudicator. On the factual material available for summary judgment, its failure to repeat that reservation in later written submissions did not amount to waiver. The application nevertheless succeeded on the jurisdiction point.