Grove Construction (London) Limited v Bagshot Manor Limited

An assignment transfers contractual rights and benefits, but not burdens, obligations or liabilities, unless the transaction amounts to a novation agreed by all relevant parties. An assignee does not become a party to the underlying contract merely because contractual rights and rights of action are assigned. A contractual adjudication clause permits adjudication only of a dispute arising under the contract between its parties. Where the original contracting party remains bound by the contract, an assignee cannot be treated as having stepped into that party’s shoes for the purpose of imposing its contractual liabilities or conferring adjudication jurisdiction.

The claimant sought summary judgment to enforce an adjudicator’s decision awarding retention monies under a construction contract. The original employer, Bagshot Manor Developments Ltd, had entered administration and assigned contractual documents and rights to the defendant. The defendant had not been a party to the construction contract and refused to pay the retention.

The defendant opposed enforcement and brought Part 8 proceedings seeking declarations that the assignment transferred no contractual burdens or liabilities and that the adjudicator lacked jurisdiction. The central issues were the proper construction of the deed of assignment, the effect of clauses 7.1 and 7.2 of the contract, and whether the claimant could adjudicate against the assignee.

1. The enforcement application was dismissed. The defendant was entitled to a Part 8 declaration.
2. An assignment transfers rights and benefits, not contractual burdens, obligations or liabilities. The contractual relationship between the original parties continues unless there has been a novation. The deed objectively assigned only the original employer’s accrued and future benefits under the contract. The reference to rights of action did not import the original employer’s burdens by implication.
3. The notice provision in clause 4 of the deed required notice consistent with the construction documents. It did not impose the original employer’s contractual obligations on the defendant.
4. Clauses 7.1 and 7.2 concerned assignment of the employer’s rights and benefits. Even if clause 7.1 permitted assignment of the employer’s entire rights, it did not transfer the claimant’s rights or make the defendant a party to the contract.
5. Article 7 permitted either party to refer a dispute arising under the contract to adjudication. Since the original contract continued between the claimant and the original employer, a dispute with the defendant did not arise under that contract for the purposes of the adjudication clause. The adjudicator therefore lacked jurisdiction.
6. The adjudicator also erred in law by treating the defendant as having stepped into the shoes of the original employer. Insolvency consequences were a hazard of contracting, and the parties could have negotiated express contractual protection.