Be careful what you wish for and or agree to

It is settled law that a residential occupier is not caught by the statutory provisions of the Housing Grants Construction and Regeneration Act 1996 as amended by The Local Democracy, Economic Development & Construction Act 2011 (“the Act”). The relevant provision of the Act, namely section 106 says…

“106       Provisions not applicable to a contract with a residential occupier

  • This Part does not apply –
    • To a construction contract with a residential occupier”

It is also settled law that a residential occupier may enter into a contract with a builder that contains an express provision that allows disputes to be settled by adjudication. Thus a residential occupier has to elect to be bound by an adjudication and, again, it is settled law that the decision of an adjudicator is only temporarily binding unless the Parties elect to agree otherwise. Section 108 of the Act clarifies the statutory provision in relation to adjudication brought in reliance of the Act by saying ……

“108       Right to refer disputes to adjudication

  • The contract shall provide in writing that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.

 The parties may agree to accept the decision of the adjudicator as finally determining the dispute.”

These provisions were examined by His Honour Judge Stephen Davies in a Technology and Construction Court judgement handed down in March 2015 between Anjali Khurana (1) & Mohit Khurana (2) -and- Webster Construction Limited [2015] EWHC 758 (TCC) (“Khurana v Webster”). For those of us who have to read judgements as part of our efforts to keep up to date and at the risk of sounding sycophantic, the judgement is a model of clarity being both easy to read and to understand.

In Khurana v Webster the contract entered into by the parties did not provide for adjudication but, when a dispute did arise, solicitors acting for both parties agreed that the dispute would be adjudicated upon by a Quantity Surveyor appointed by the RICS and that the adjudication would be conducted under the Scheme for Construction Contracts (England and Wales) Regulations (as amended) save that the decision of the Quantity Surveyor “would be binding on the parties on a final basis”.

Ultimately, Mr Peter Dale was appointed as the adjudicator by the RICS and it is readily apparent that the Khuranas were less than impressed with Mr Dale’s Decision as they refused to be bound by his award. In November 2014 HHJ Raynor QC heard enforcement proceedings brought by Webster and gave judgement in favour of Webster but stayed execution on condition that the Khuranas must pay the value of Mr Dale’s Decision into court and commence court proceedings in relation to all matters in dispute.  The Khuranas complied with the directions of HHJ Raynor QC and Webster then applied to dismiss the legal proceedings commenced by the Khuranas. 

In a hearing which took place in February 2015 to hear Webster’s application to dismiss the proceedings, the Khuranas argued (a) that there was no agreement that the adjudicator's decision would be final and binding upon them and (b) even if there was such an agreement that it was contrary to the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCR”) and thus unenforceable.

His Honour Judge Stephen Davies decided that the parties had entered into an agreement to be bound by an adjudicator’s decision on a final and binding basis. In relation to the Khuranas’ secondary position whilst deciding that UTCCR applied, the agreement was freely entered into by the parties, there was no individually imposed term by Webster and the Khuranas were legally represented throughout the process of negotiating and entering into the agreement. In such circumstances there was no significant imbalance in the parties’ rights and obligations and the term relating to the decision being final and binding was not unfair.  

Reading the judgement over, it is apparent that having freely entered into an agreement to have the dispute finally determined by adjudication, an agreement that the Khuranas freely chose to enter, and because the resulting decision was not to their liking, the Khuranas sought to unpick what had been agreed. Such an approach is rarely endorsed by the Courts and it is perhaps not unsurprising that the Khuranas' claim was dismissed.

Finally, His Honour Judge Stephen Davies made it clear that even if the Khuranas had succeeded in proceeding with its claim again Webster there could have been no basis for seeking repayment of the fee paid to the adjudicator since he did nothing more than he was appointed to do and even if his answer was wrong, absent any wrongdoing on his part, he would still have been entitled to be paid his reasonable fee for the services provided. 

Peter Vinden is a practising Arbitrator, Adjudicator, Mediator and Expert. He is Managing Director of The Vinden Partnership and can be contacted by email at pvinden@vinden.co.uk.

For similar articles please visit www.vinden.co.uk.

Peter Vinden

Peter is an experienced professional in the construction industry with particular expertise in quantity surveying and the commercial management of contracting organisations. 

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