Ferson Contractors Ltd v Levolux AT Ltd

Construction contract — Adjudication — Enforcement — Adjudicator determining interim dispute and ordering payment by appellant to respondent — Court enforcing order — Whether binding nature of adjudicator’s decision giving way to conflicting contractual provisions as to payment — Section 108 of Housing Grants, Construction and Regeneration Act 1996 — Appeal dismissed The appellant contractor engaged the respondent as a subcontractor to supply and fit panelling. The subcontract incorporated the conditions contained in the standard GC/Works subcontract. It provided for the resolution of interim disputes by reference to an adjudicator, as required by section 108 of the Housing Grants, Construction and Regeneration Act 1996. Clause 29.8 of the contract provided that where the appellant chose to determine it for one of a number of listed reasons, “all sums then due or accruing due from the Contractor to the Sub-Contractor shall cease to be due or accrue due”. Clause 29.9 stated that until the subcontract works had been completed, “the contractor shall not be bound… to make any further payment to the sub-contractor”. A dispute arose over payment, and the respondent stopped work. It gave notice of its intention to refer the dispute to adjudication, but the appellant subsequently purported to determine the contract on the ground that the respondent had wrongly suspended its performance. In due course, an adjudicator determined the dispute and made an award to the respondent. The appellant failed to pay, and the respondent brought court proceedings in which it obtained summary judgment against the appellant under CPR 24. The appellant appealed. The appeal was conducted on the assumed basis that the appellant had validly terminated the contract and that the adjudicator’s decision was in error. The respondent relied upon the general principle that an adjudicator’s decision was binding and enforceable pending final resolution of the dispute by arbitration or litigation. The appellant contended that the general principle, and the apparent obligation to make payment in accordance with the adjudicator’s decision, gave way to terms of the contract that provided otherwise. It relied upon clauses 29.8 and 29.9. Held: The appeal was dismissed. The approach contended for by the appellant would defeat the plain purpose of section 108, namely to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis, requiring the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement: Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] 3 EGLR 7 and Bouygues UK Ltd v Dahl-Jensen UK Ltd [2001] 1 All ER (Comm) 1041 considered; Bovis Lend Lease Ltd v Triangle Development Ltd [2003] BLR 31 disapproved. The contract had to be construed so as to give effect to the intention of parliament, rather than to defeat it. If that could not be achieved by way of construction, the offending clause would have to be struck down, although the construction route ought to suffice for clauses 29.8 and 29.9. Nicholas Collings (instructed by McCloy & Co, of Bradford-on-Avon) appeared for the appellant; Sean Brannigan (instructed by Davies & Partners, of Gloucester) appeared for the respondent. Sally Dobson, barrister