Recovering adjudication costs under the Late Payment of Commercial Debts (Interest) Act 1998

Recovering adjudication costs under the Late Payment of Commercial Debts (Interest) Act 1998
Stack of pound coins on financial figuresRachel Gwilliam, partner at Blake Morgan, explores the possibility of recovering adjudication costs under the Late Payment of Commercial Debts (Interest) Act 1998 (LPCD(I)A 1998) and looks at how the recently-published judgment in Lulu Construction v Mulalley impacts the position.

LPCD(I)A 1998 implies a number of terms into commercial contracts for the supply of goods and services. In particular, LPCD(I)A 1998 prescribes a statutory rate of interest of 8% above the Bank of England’s official dealing rate for late payment of commercial debts. The creditor is further entitled to ‘compensation arising out of late payment’, comprising a fixed sum.

In addition, since March 2013, creditors have been entitled to claim further sums by way of ‘compensation arising out of late payment’ to cover the costs of recovering debts to which LPCD(I)A 1998 applies. LPCD(I)A 1998, s 5A(2A) now provides:

If the reasonable costs of the supplier in recovering the debt are not met by the fixed sum, the supplier shall also be entitled to a sum equivalent to the difference between the fixed sum and those costs.

HGCRA 1996, s 108A

There has been some debate amongst construction law practitioners as to whether or not LPCD(I)A 1998, s 5A(2A) conflicts with section 108A of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996). HGCRA 1996, s 108A provides that ‘any contractual provision made between the parties to a construction contract which concerns the allocation as between those parties of costs relating to the adjudication of a dispute arising under a construction contract’ is ‘ineffective’ unless it is made in writing:

  • and is contained in the construction contract and confers power on the adjudicator to allocate his fees and expenses as between the parties, or
  • after the giving of notice of intention to refer the dispute to adjudication

I have explored in some detail the question of

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