The Facts of Life
Most construction contracts contain express adjudication provisions. If they do not, adjudication is still available thanks to the statutory regime introduced by the Housing Grants, Construction and Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act 2009 (‘Construction Act’). Under Section 114(4) of the Construction Act, where a construction contract does not include all the adjudication provisions in Section 108 of the Construction Act, the adjudication provisions of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended) take effect.
An adjudication was the subject, in part, of a recent TCC decision, Husband & Brown Limited v Mitch Developments Limited (2015 EWHC 2900 (TCC)). The claimant had instigated an adjudication in order to recover a commission to which it claimed entitlement under an agency agreement. The claimant found potential development sites for a developer, the defendant, in return for commission if the developer completed the purchase of a site. There was a dispute as to the amount of the commission. The adjudicator found for the claimant but the defendant did not pay and the dispute went to court.
As it happens, the claimant won; but that is not the point of this story. The remarkable thing about this case is how the claimant was able to take the matter to adjudication in the first place. The Construction Act relates to construction contracts. This was an agency agreement between a developer and a land finder. The agency agreement was neither an agreement to carry out construction operations nor an arrangement for the carrying out of such. The adjudicator was mistaken in assuming jurisdiction.
The claimant had argued that he should be entitled to the costs of the adjudication. This argument was based on the decision of Mr Justice Akenhead referred to above that adjudication is a fact of life in construction projects. In his judgment there was a sufficient causative link between the defaults of the consultant (AEW Architects) and the adjudication and that it was within the bounds of reasonable foreseeability that there would be adjudication in the circumstances of that case. The judge refused to apply that test here.
She distinguished this decision to its facts and would not consider this technical argument where there was clearly no jurisdiction in the first place for the parties to seek adjudication under the Construction Act. The judge reasoned that to allow the claimant to pursue a claim for recovery of costs would subvert the statutory scheme for adjudication which does not allow recovery of such costs.
The moral? Yes we all know and love adjudication but don’t go there unless there is jurisdiction to do so.