The recent case of Lulu Construction Ltd v Mulalley & Co Ltd[2016] EWCH 1852 (TCC) considered whether an Adjudicator has jurisdiction to make an award in favour of a Responding Party where the issue in question has not been raised in the preliminary documents to the Adjudication (the Notice of Adjudication, the Referral Notice or the Response).

During the Adjudication, Lulu (the Responding Party) sought to bring a ‘counterclaim’ for “debt recovery costs” of approximately £48,000 against Mulalley (the Referring Party) as part of its defence.

This ‘counterclaim’ had not been raised in any of the preliminary documents and the Referring Party challenged it’s inclusion on the basis that the Adjudicator’s jurisdiction was limited to the issues which were contained in those documents.

Despite this argument, the Adjudicator made an award in favour of the Responding party for the value of the costs claimed.

The case reached the High Court as part of proceedings to enforce the Adjudicator’s decision.

The Court determined that the Adjudicator was correct to consider the Responding parties ‘counterclaim’ because the costs being claimed were clearly connected with and ancillary to the referred dispute an so could properly be considered to be part of it (following a previous decision in Allied P & L Limited and Paradigm Housing Group Limited [2009] EWHC 2890 (TCC)).

Unhelpfully, however, the Court did not give any guidance as to how to determine whether an issue is sufficiently connected to the dispute.

Following this decision, the parties to an Adjudication must be aware of the possibility that this type of ‘counterclaim’ could be raised by the Responding Party even where it has not previously been raised and that this could result in an award being made in favour of the Responding Party.

The key for both parties will be in proving or disproving (as appropriate) that the ‘counterclaim’ is sufficiently connected to the dispute to make it part of it..