Is your adjudicator’s decision permanently binding?

Normally, the answer would be no. Adjudication has become a common-place part of the construction industry allowing parties to quickly obtain “interim-binding” decisions over any disputes which they may become involved in. As most parties to construction contracts are aware, the Construction Act and the Scheme for Construction Contracts provides for these decisions to be binding pending any final determination by legal proceedings, arbitration (where provided for by the contract or by agreement) or by agreement between the parties. This provision is rarely amended in construction contracts.

However, a recent case has highlighted the possibility of making adjudication decisions permanently binding. This case concerns a residential occupier and therefore the contract was not a construction contract for the purposes of the Construction Act, but the principles are equally applicable to construction contracts.

In Khurana and another v Weber Construction Ltd [2015] EWHC 758 (TCC), the parties had not included any adjudication provisions in their contract (and these were of course not implied given that it was not a construction contract). However, when a dispute arose, they agreed to refer the dispute to adjudication adopting the provisions of the Scheme, save that the decision was to be “binding on the parties”. Following the adjudicator’s decision, the Khuranas (the residential occupiers) sought to litigate, however the TCC judge decided that the parties had legitimately agreed that the adjudicator’s decision should be binding and therefore the Khuranas could not litigate.

It is worth being aware of any bespoke dispute resolution provisions in your contracts which might alter the standard position under the Scheme. It may also be worth (for some, particularly lower value, projects) amending the Scheme provisions in your own contracts if you consider that it would be advantageous to limit dispute resolution to adjudication. This could produce a significant saving in costs if litigation would otherwise have been pursued, although it goes without saying that adjudications can sometimes produce bizarre results and you would be stuck with these. Of course, that may not matter where the value of a dispute is too low to ever justify litigating.

For further details email: constructionseminars@bpe.co.uk.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice. 

To download the whole newsletter as a PDF, click here.