J Murphy & Sons Ltd v W Maher and Sons Ltd

An adjudication clause covering disputes arising under or in connection with a construction subcontract may extend to a dispute about whether the parties reached a binding final-account settlement. The question is whether the alleged settlement concerns, varies or resolves an entitlement arising under the original subcontract. A dispute about the existence or binding effect of the alleged settlement remains referable to adjudication. Only where an entitlement has been unarguably settled may there be no subsisting dispute to adjudicate. Construction and commercial purpose support the presumption that disputes arising from the parties’ relationship should be determined by the same tribunal.

Maher was engaged by Murphy under an NEC3-based sub-subcontract for spoil removal and related work. The subcontract contained an adjudication clause for disputes arising under or in connection with it. Maher alleged that discussions and subsequent emails created a binding agreement fixing the final account at £720,000. Murphy later valued the work at a substantially lower figure.

Maher referred the dispute to adjudication under the Scheme for Construction Contracts. Murphy sought a declaration that the adjudicator lacked jurisdiction because the alleged settlement was a separate agreement outside the original adjudication clause. The central issue was whether the dispute about the alleged settlement arose under or in connection with the subcontract.

1. Jurisdiction. Murphy’s claim failed. The dispute identified in the notice of adjudication could be referred to adjudication under the subcontract or, alternatively, under the Scheme for Construction Contracts.
2. The adjudication provisions in the subcontract survived the mistaken identification of the TCC as the adjudicator-nominating body. Sections 108(1) to (4) of the Housing Grants, Construction and Regeneration Act 1996 did not require a named external nominating body. The contract plainly contemplated adjudication through a responsible institution, such as RICS.
3. The words “arising under or in connection with” the subcontract were broad enough to cover the alleged settlement. Whether the agreement was binding, temporarily binding, non-binding, or had never been made, the dispute concerned Maher’s alleged entitlement under the subcontract and therefore arose in connection with it.
4. The court distinguished Shepherd Construction Ltd v Mecright Ltd [2000] BLR 489. That case concerned a settlement whose binding effect was challenged by duress. It did not govern a dispute about whether any agreement had been reached. An unarguably binding settlement might extinguish a subsisting dispute, but that was not the position here.
5. Applying the commercial-purpose reasoning in Premium Nafta Products Ltd v Fili Shipping Co Ltd (The Fiona Trust) [2007] UKHL 40, it would be illogical to require related disputes to be determined by different tribunals. Judgment was given for Maher, Murphy was ordered to pay £11,000 costs, and the declaration sought by Maher was granted.