L Brown & Sons Ltd v Crosby Homes (North West) Ltd

An adjudication clause extending to disputes arising “under, out of or in connection with” a construction contract may encompass disputes concerning supplemental or side agreements made during performance of that contract. The court must construe the contractual documents together and give effective meaning to amendments, particularly where the contract contains an order-of-precedence provision. A side agreement may amount to a variation even without expressly identifying the clauses varied. In any event, disputes under a separate supplemental agreement may fall within wider words such as “arising out of” or “in connection with” the underlying contract where the agreement is closely connected with its performance.

The claimant contractor sought to enforce an adjudicator’s decision awarding sums for a completion bonus and the waiver of liquidated damages. The defendant employer commenced Part 8 proceedings challenging the adjudicator’s jurisdiction and contending that the relevant disputes concerned separate alleged side agreements rather than disputes under the JCT contract.

The contract’s Article 5 referred disputes arising “under” the contract to adjudication. An amendment to clause 39A.1 inserted the wider words “out of or in connection with”, but Article 5 was not amended. The central issues were whether the amendment widened the adjudication jurisdiction and whether disputes concerning the side agreements fell within that jurisdiction.

1. Jurisdiction under the amended contract. Article 5 and clause 39A.1 had to be read together. The amendment to clause 39A.1 was intended to broaden the scope of adjudication. Construing the provisions so that the added words had effect, disputes arising under, out of or in connection with the contract were referable to adjudication. Clause 2.4.4 independently produced the same result because it gave the amendments precedence over conflicting contract documents (paras [22]–[27]).
2. Characterisation of the side agreements. The agreements introduced a bonus system and relief from liquidated damages in response to issues concerning performance of the underlying contract. Although they did not expressly identify particular contractual clauses as varied, they changed the payment obligations and the entitlement to liquidated damages. They therefore operated as variations of the contract, and disputes under them were disputes under the contract (paras [49]–[52]).
3. Alternative wider basis. Even if the side agreements were treated as separate obligations, the disputes arose out of or in connection with the contract. Those words were wider than “under” and covered matters arising from the performance of the contract. The side agreements were sufficiently connected with that performance to fall within the adjudication clause (paras [48]–[54]).
4. The jurisdictional challenges in the Part 8 proceedings failed. Subject to further submissions, the claimant was entitled to judgment for the sums determined as due by the adjudicator’s decision of 26 October 2005 (para [55]).