Two Cherries

Those working in the construction industry will know that an adjudicator’s decision is temporarily binding. In other words, it is binding until the dispute is finally determined by legal proceedings, whether by arbitration or litigation [1]. However, in a recent case [2] the Court decided that the parties had agreed the adjudicator’s decision would be binding, which meant that there was no option to start further legal proceedings to finally determine the dispute. The parties were stuck with the adjudicator’s decision.

It is unusual for parties in a dispute to agree to adjudicate after a dispute has arisen. However, that is what the Khuranas (the residential occupiers) and Weber Construction Limited (Weber) (the contractor) did when a dispute arose over building work at the Khuranas’ property in Bowden, Cheshire.

Adjudication under the Scheme did not apply to the construction contract between the parties, because the right of adjudication does not apply to construction contracts with residential occupiers for works on a house [3]. On this basis, the parties agreed that the dispute would be referred to adjudication using the Scheme.

The adjudication took place but the Khuranas did not like the adjudicator’s decision. As such, they started court proceedings to have the sums due under Weber’s final account determined. Weber argued that the adjudicator had already dealt with the dispute and that his decision was ‘binding’ i.e. it was ‘finally binding’. Weber said that this meant that it was not open to the Khuranas to ask the Court to look at the dispute again.

In deciding the case, the Judge noted that, ordinarily, this issue would not have arisen because the proposal to use the Scheme meant that the adjudicator’s decision would only be temporarily binding. However, the key words in the adjudication agreement between the parties were that the Scheme would apply ‘save that the decision… shall be binding on the parties’. The Judge concluded that this could only sensibly have been intended to depart from the default position under the Scheme such that the adjudicator’s decision would be permanently binding. In short, it was being made plain by the use of these words that the losing party to the adjudication could not then re-run the dispute afresh in legal proceedings.

Whilst this case does not create new law it is a reminder that, if you enter into an ad hoc adjudication agreement, you need to be mindful that, if you use the phrase ‘shall be binding’, you understand the effect.

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[1] Section 108(3) of the Scheme to the Construction Act

[2] Khuranas and Another v Weber Construction Limited [2015] EWHC 758 (TCC) (20 March 2015)

[3] Section 106 of the Construction Act

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.