Adjudication: Temporarily binding or conclusively binding?
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.