Construction: availability of adjudication depends on nature of dispute not nature of remedy claimed

A claim for restitution can exist where there is no contract. There may be no contract because there was never agreement on the price. There the basis for claim is usually “unjust enrichment”. That is a different cause of action from breach of contract.

In a contractual dispute, where there has been a total failure of consideration, a party may recover the sums he has paid – as a claim for restitution instead of damages. In short the claim would be “for restitution”, but, would be based, not on unjust enrichment, but on “a total failure of consideration amounting to a breach of contract”.

In ISG Retail Ltd v Castletech Construction Ltd [2015], ISG Retail Ltd (“ISG”), had made an advance payment to Castletech Construction Ltd (“CC”) of £35,000 plus VAT. In return CC had provided nothing of value to ISG, so that, in breach of contract, there had been a “complete failure of consideration” by CC. So the adjudicator ordered CC to repay that sum forthwith.

CC said that the adjudicator had no jurisdiction to do what he did. Paragraph 1 of Part I of the Scheme for Construction Contracts (SI No 649 of 1998) (“the Construction Scheme”) confers the right on any party to a construction contract to refer to adjudication “any dispute arising under the contract”. CC said that ISG’s restitutionary claim was not made “under contract” because restitutionary claims are not made under contracts, they are made “in equity”, restitution being an equitable remedy – and as such the adjudicator had no jurisdiction/power to decide it under the Construction Scheme.

The High Court said CC had confused the dispute and the remedy.

The scope of the jurisdiction of the adjudicator had been determined by the nature of the dispute identified in the Notice of Adjudication, not by the nature of the restitutionary remedy claimed.

Here there was a total failure of consideration which is almost invariably the result of a breach of contract unless performance of the contract has been “frustrated”.

There was nothing in the Construction Scheme that deprived an adjudicator of the power to grant relief by way of restitution if that was an available remedy for the breach of contract in question.

It being established that the dispute arose from a breach of contract and was therefore within his jurisdiction, the adjudicator could award any remedy within his power – such as the payment of a sum of money – which the claimant was entitled to for breach of contract.

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