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can you recover your adjudication costs?

15 January 2014
Adjudication costs and recovery in the case of The Board of Trustee of National Museums and Galleries on Merseyside v AEW Architects and Designers Ltd and PIHL Galliford Try JV (2013) EWHC 2403 TCC

Parties bear their own costs in adjudication (save in limited circumstances where both parties agree in advance to allow the adjudicator to decide costs). Historically, parties have not sought to recover such costs should the dispute later proceed to court. However, a recent court case has held that such costs can be recoverable in certain circumstances.

The case
The Board of Trustee of National Museums and Galleries on Merseyside v AEW Architects and Designers Ltd and PIHL Galliford Try JV (2013) EWHC 2403 TCC concerned design and construction defects at the new Museum of Liverpool. In a judgment containing detailed findings of fact regarding breach of contract and negligence, the court ordered that the architect (AEW Architects and Designers Ltd, (AEW)) and the contractor (PIHL Galliford Try JV, (PIHL)), pay the claimant over £1.1 million in damages.

The judgment is important because the court allowed the museum to recover from AEW costs the museum had incurred in an earlier adjudication commenced against it by PIHL (see paragraphs 124 to 130) – a head of loss for which parties rarely claim. That adjudication concerned PIHL’s liability for design responsibility for certain work at the museum. The adjudicator found for PIHL, granted it declaratory relief and ordered that the museum pay his fee (which it did).

Despite the fact that AEW had not been party to the adjudication proceedings, the court held that the museum was entitled to recover from it the adjudicator’s fee, along with (in part) the museum’s own legal and expert fees. Mr Justice Akenhead said that this was a matter of causation and what was reasonably foreseeable. He found that:

  1. It was reasonably foreseeable that PIHL would refer the dispute to adjudication; and
  2. But for AEW’s breaches of contract and negligence, there would have been no dispute between the museum and PIHL.

Case comment
This case is likely to prompt more parties to seek to recover the costs of previous adjudications against their professional team. In the event that such adjudications were reasonably foreseeable and there is sufficient causative link between the alleged negligence of the consultant and those adjudications it seems likely that the court will grant such requests. Where insurers are providing coverage this is now a potential litigation expense which needs to be taken into account when setting reserves.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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