Ferson Contractors Ltd. v Levolux A.T. Ltd.

A construction adjudicator’s decision, made within jurisdiction, is binding and enforceable until the dispute is finally determined by litigation, arbitration or agreement. An error within jurisdiction does not prevent enforcement.

A construction contract must be interpreted consistently with the statutory purpose of prompt interim enforcement. General provisions suspending payment following termination cannot supersede an obligation to pay money awarded by an adjudicator. They must be read as inapplicable to that obligation; if such a construction is impossible, the conflicting provision must yield.

A subcontractor obtained an adjudicator’s decision requiring its contractor to pay an outstanding interim sum, interest and costs. The contractor withheld payment, relying on contractual provisions under which sums ceased to be due following termination of the subcontract.

His Honour Judge Wilcox granted summary judgment enforcing the decision. He held that the adjudicator had implicitly determined that the purported termination was ineffective and that the termination provisions did not apply to money due under an adjudicator’s award.

The contractor appealed on the assumed basis that the subcontract had been validly terminated. The central issue was whether contractual termination provisions could override the interim binding effect required by section 108 of the Housing Grants Construction and Regeneration Act 1996.

1. Appeal dismissed unanimously. Mantell LJ held that the adjudicator’s decision necessarily implied that the subcontractor had been entitled to suspend work and that the contractor’s purported termination for wrongful suspension was ineffective. The decision required payment as at its own date, rather than merely declaring what had been due at an earlier date.

2. Section 108 of the Housing Grants Construction and Regeneration Act 1996 establishes a speedy, provisional dispute-resolution process. An adjudicator’s decision is binding and must be complied with until final determination by litigation, arbitration or agreement. A decision containing an error within the adjudicator’s jurisdiction remains enforceable. Only a jurisdictional defect, such as answering the wrong question, renders the decision a nullity.

3. The contractor could not rely on the termination provisions to withhold the adjudicated sum. A construction contract must be interpreted to give effect to Parliament’s purpose. Clauses under which sums otherwise ceased to be due following termination therefore had to be read as excluding money due by reason of an adjudicator’s decision. If construction could not reconcile the provisions, the offending provision would have to be struck down.

4. Parsons Plastics (Research and Development) Ltd v Purac Ltd (2002) BLR 334 was distinguishable. It did not involve the statutory effect of section 108 and concerned a set-off and counterclaim that the adjudicator had not determined. Here the contractor relied on a matter which the adjudicator had necessarily resolved against it.

5. Longmore LJ agreed. The express promise to comply forthwith with every adjudicator’s decision, submit to enforcement and forego arbitration after adjudication placed the matter beyond doubt. It required summary judgment without renewed argument about matters otherwise referable to arbitration. Even without that express clause, the adjudicated payment obligation would take precedence over conflicting termination provisions. Ward LJ agreed with both judgments.

1. Court of Appeal (Civil Division): The contractor’s appeal was dismissed unanimously. The summary judgment enforcing the adjudicator’s decision was upheld: [2003] EWCA Civ 11.

2. Technology and Construction Court: His Honour Judge Wilcox granted summary judgment enforcing the adjudicator’s decision. No citation for that judgment is stated.