Agreed adjudication procedure could by agreement make final and binding decision

A Scheme Construction Adjudication under Section 108(3) of the Housing Grants, Construction and Regeneration Act 1996 (“Construction Act”) carries with it an implicit proviso that, unless expressly stated in the Construction Contract or agreed between the parties to the contrary, the adjudicator’s decision will be only temporarily binding on the parties, in the sense that they must comply with it, and the court will enforce it, irrespective of any complaints about its correctness or other issues which the losing party may wish to raise, unless and until the dispute is finally resolved. That final resolution may be by legal proceedings, by arbitration (where applicable) or by agreement.

In the High Court case of Khurana & Anor v Weber Construction Ltd [2015] the right of adjudication under the Scheme did not statutorily apply to the construction contract, because under Section 106 of the Construction Act the right of adjudication under the Scheme does not statutorily apply to construction contracts with residential occupiers for operations on a dwelling house.

Nonetheless in a letter the Defendant’s solicitor expressly proposed, and in their written response the Claimant’s solicitors expressly agreed to, the appointment of a quantity surveyor under the Scheme under procedures to be “conducted in accordance with” the Scheme “save that the decision of the independent structural quantity surveyor shall be binding on the parties.”

The court said both parties must be taken to have been aware that a Scheme adjudication decision would be only temporarily binding, unless expressly stated to the contrary. The words “save that the decision … shall be binding on the parties” could only sensibly have been intended to derogate from that default position.

The reasonable observer could only have concluded that those words in the Defendant’s solicitor’s letter clarified that unlike a Scheme adjudication, the adjudicator’s decision would be permanently, as opposed to temporarily, binding on the parties if their proposal was accepted.

The letter made it plain that the losing party to the proposed adjudication could not subsequently elect to re-run the whole dispute afresh in legal proceedings if that proposal was accepted (which it was by the Claimant’s solicitor’s letter).

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.