Banner Holdings Ltd v Colchester Borough Council

An adjudicator may determine whether an employer’s contractual determination was valid and identify its financial consequences, even where the contract prevents the adjudicator from varying or overruling the determination itself. A finding that a determination for cause was unjustified may convert it, under the contract, into a deemed determination at will. Any contractual provision which prevents referral of that dispute would be incompatible with section 108 of the Housing Grants Construction and Regeneration Act 1996. Where the contractual adjudication provisions fail to comply with section 108, the statutory scheme applies to the extent required; the judgment tentatively favoured wholesale replacement for adjudication provisions. “Final and conclusive” in paragraph 20 of the Scheme refers to finality between the contracting parties, not special finality against the adjudicator.

Banner Holdings Ltd was engaged by Colchester Borough Council under a construction contract incorporating the GC Works/1 Form and Model Form 24 to build a visual arts facility. The Council served a notice purporting to determine the contract for cause under Condition 56(1), relying on alleged contractor defaults.

The Council later commenced an adjudication seeking declarations that the determination was valid and that the resulting financial calculations should be undertaken. Banner brought CPR Part 8 proceedings for a declaration that the adjudicator lacked jurisdiction. The central issues were whether Condition 59(8) prevented the adjudicator from considering the validity of the determination and, alternatively, whether any such restriction was displaced by section 108 of the Housing Grants Construction and Regeneration Act 1996 and the Scheme.

The claim was dismissed. The adjudicator had jurisdiction to decide whether the Council’s determination under Condition 56(1) was valid.

1. Condition 59(8) prevented the adjudicator from varying or overruling certain specified employer decisions. The Council was not seeking to vary or overrule its decision to determine the contract. It sought confirmation that the decision was valid.

2. If the adjudicator concluded that the contractual grounds for determination had not arisen, the determination would automatically be treated under Condition 56(8) as a determination at will. That would identify the legal status and financial consequences of the existing determination. It would not undo, vary or overrule the original decision to determine.

3. Condition 59(8), read as a whole, distinguished between the unchallengeable decision itself and the contractor’s entitlement to financial compensation arising from an unjustified decision. The adjudicator therefore had jurisdiction to decide whether the determination for cause was justified and what financial consequences followed.

4. Alternatively, if Condition 59(8) excluded that jurisdiction, it would fail to comply with section 108 of the Housing Grants Construction and Regeneration Act 1996. Section 108 contains no qualification excluding disputes about whether a contractual determination was justified. Section 108(5) would consequently require the adjudication provisions of the Scheme to apply.

5. The judge tentatively considered that section 108(5), at least for adjudication provisions, favoured wholesale replacement of non-compliant contractual provisions by the Scheme rather than piecemeal reconstruction. It was unnecessary finally to decide that question.

6. Paragraph 20 of Part I of the Scheme did not prevent the adjudicator from considering the dispute. “Final and conclusive” referred to decisions made final between the contracting parties, not decisions binding only as against an adjudicator. The determination had not been treated as final and binding between the parties.

The court declared that the adjudicator had the necessary jurisdiction to decide the validity of the determination under Condition 56(1).