Mr and Mrs Khurana lived in Cheshire and they engaged
Webster Construction Limited to carry out construction works at the
property. The contract used was a
pre-printed document entitled “Large Works Contract” but was a form of contract
not seen previously by Edwards-Stuart J, the trial judge in the case.
The parties fell out.
The dispute concerned whether the contract works had been completed and
whether in the circumstances the employer was liable to make the final payments
due to the contractor under the contract. Solicitors were engaged on both
sides. The contractor contended the
works were complete and the net sum due following their final valuation should
be paid together with a release of the retention. The employer’s position was that the work was
not complete and there were a number of defects that needed to be addressed.
The solicitors for the contractor proposed that the parties
enter into an agreement to the have the matter resolved by an independent
surveyor. The proposal was for the
dispute to be resolved under the Scheme for Construction Contracts “save that
the decision of the independent … surveyor shall be binding on the
parties.” This procedure was agreed to
by the employer. An adjudication was
subsequently commenced and the outcome was a net payment due to the contractor.
The employer sought to challenge this decision on the basis
that an adjudicator’s decision is temporarily binding only and it was open for
them to have a second bite at the cherry.
Proceedings were commenced in the TCC for a determination of the final
account and that included a rehearsal of the arguments raised in the
adjudication.
An objection was raised by the contractor. It was contended on its behalf that while the
Scheme (and indeed Section 108(3) of the Construction Act) provides that
construction adjudications are temporarily binding it is open to the parties to
agree that it will be conclusively binding.
The qualifying words set out above were a clear indication that the
parties intended to depart from the default position of a decision being
temporarily binding. If it were
otherwise then why the use of the words “save that”? Furthermore this was a
case where the parties are dealing with a statutory adjudication but a
contractual agreement to adjudicate. The
contract was not a construction contract within the meaning the Construction
Act as it concerned works to a residential owner’s home. Therefore Section 108(3) did not apply.
The conclusion of the TCC was that the agreement to
adjudicate was one whereby the parties would be bound by the decision of the
adjudicator, not just temporarily but permanently. That was the ordinary meaning of the
agreement in this case.
It is perhaps an unusual case because in the vast majority
of adjudications, the underlying contracts make clear that the decision on
adjudication is temporarily binding only.
The case is however an important reminder that if you are drafting your
own dispute resolution clause in a case not involving a ‘construction contract’
and in doing so incorporating a contractual right to adjudicate make sure that
you choose your wording carefully. ,
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