Khurana & Anor v Webster Construction Ltd

An agreement to refer a construction dispute to adjudication may make the adjudicator’s decision finally binding, rather than temporarily binding, if that is the objective meaning of the agreement read in context. Clear words are required before a party’s unrestricted access to the courts is excluded, but the court should not impose an unduly exacting standard where legally advised parties deliberately choose binding dispute resolution. A party that advances matters as a defence or set-off in a final adjudication is bound by the adjudicator’s determination of those matters and cannot re-litigate them as an independent claim.

The claimants, owners of a substantial house, entered into a construction contract with the defendant builder. After a payment dispute and statutory demands, the parties agreed by correspondence to refer the dispute to adjudication under the Scheme for Construction Contracts, with the adjudicator’s decision to be binding.

The adjudicator determined the defendant’s final account and rejected or allowed elements of the claimants’ asserted abatements and set-offs. The claimants then commenced court proceedings seeking re-determination of the final account, damages for defective work and delay, and recovery of adjudicator’s fees. The defendant applied to set aside or stay the proceedings.

1. Construction of the adjudication agreement. The word “binding” was not determinative in isolation. Read against the parties’ knowledge that a Scheme adjudication is ordinarily temporarily binding, the added words that the decision would be binding could only sensibly mean that it was to be permanently binding. The agreement therefore excluded a fresh determination of the same dispute by the court.
2. The agreement was objectively clear. The claimants’ solicitor’s response, although using “and” rather than “save that”, was an acceptance rather than a counter-offer. Clear words were required before court access could be excluded, but the words used met that standard.
3. Unfair terms. The finally binding term had been individually negotiated. The claimants had been able to influence its substance through their solicitors. Alternatively, the term was not unfair under regs 5 and 6 of the Unfair Terms in Consumer Contracts Regulations 1999. It was even-handed, jointly beneficial, openly proposed and agreed by parties with legal representation. Nor did the term fail the plain and intelligible language requirement in reg 7. Normal construction produced no genuine ambiguity, so the consumer-favourable tie-breaker did not apply.
4. Effect of the adjudication. The adjudicator had determined the defendant’s final account, including valuation, incomplete or defective work, and set-off for defective work and delay. The claimants could not re-open those matters by pleading them as positive claims. Matters never raised in the adjudication were not barred by abuse of process where the claimants could not have advanced them by counterclaim without the defendant’s consent.
5. The claim was set aside and the proceedings stayed on the jurisdictional challenge. In any event, summary judgment would have been entered for the defendant. The claim for adjudicator’s fees could not succeed.

Not stated in the judgment.