Building contract – Termination — Adjudication clause — Parties entering into building contract containing adjudication clause providing for referral to adjudicator within two days of appointment — Defendant failing to serve referral within time limit — Claimant claiming to have accepted defendant’s repudiatory breach of adjudication — Whether adjudication agreement capable of repudiation — Application dismissed
The defendant company was engaged to carry out refurbishment works at a train maintenance depot and employed the claimant company as a subcontractor for certain roofing and glazing works. The subcontract incorporated the CECA form of subcontract (6th ed) containing the February 2006 amendment. Under clause 18B(1)(a), each party was entitled to refer any dispute to adjudication under the Institution of Civil Engineers (ICE) adjudication procedure (1997) (CEAP), para 4.1 of which provided that the referring party had to serve its statement of case within two days of the adjudicator’s appointment.
Disputes arose between the parties and their contractual relationship was terminated. The claimant issued proceedings against the defendant in respect of the outstanding value of its work and for damages for wrongful termination. Those proceedings were stayed to arbitration by agreement and an arbitrator was appointed.
Following the arbitrator’s appointment, the defendant served a notice of adjudication on the claimant, seeking a declaration that it had lawfully determined the claimant’s employment under the subcontract or, alternatively, that the claimant had repudiated the subcontract. The defendant applied to the ICE to appoint an adjudicator, but the parties were unable to agree on an appointee. When the ICE appointed K, the defendant wrote to it expressing concerns about possible bias in favour of the claimant and attaching a fresh adjudication notice requesting the appointment of a different adjudicator.
The claimant considered that the defendant’s refusal to serve its statement of case under para 4.1 of CEAP constituted a repudiatory breach of the adjudication agreement under the subcontract which it purported to accept; the adjudication with the appointed adjudicator could not therefore proceed. The claimant applied for an injunction to restrain the defendant from continuing or making further applications to adjudicate the dispute. The questions for the court were whether: (i) an arbitration agreement or adjudication could be repudiated; and (ii) it was possible to have partial repudiation of an arbitration agreement or adjudication.
Held: The application was dismissed.
(1) Although, ultimately, it would be a matter of interpretation of the particular contract, arbitration clauses survived termination or an accepted repudiation. Such clauses typically involved the reference to arbitration of any dispute between the parties, and the parties’ mutual intention was deemed to be that, post-termination or post-repudiation, disputes were intended to be so referable. There was in principle no reason to adopt a different approach to adjudication. That approach applied even more emphatically to adjudication because most UK construction contracts were subject to a statutory right to adjudication under section 108(1) of the Housing Grants, Construction and Regeneration Act 1996, entitling a party to refer a dispute arising under the contract to adjudication, subject to non-optional conditions.
The reasoning behind section 108(5) made the concept of repudiation of an adjudication agreement in a construction contract difficult to comprehend because the statute required, in an unqualified way, that a party to such a contract had a right at any time to refer a dispute to adjudication. The party could not lose its right to adjudicate by in some way repudiating the adjudication agreement and the concept of repudiation did not apply to statutory rights: Heyman v Darwins Ltd [1942] AC 356, Hart Investments Ltd v Fidler [2006] EWHC 2857 (TCC); [2007] BLR 30, Cubitt Building & Interiors Ltd v Fleetglade Ltd [2006] EWHC 3413 (TCC); 110 Con LR 36 and PT Building Services Ltd v Rok Build Ltd [2008] EWHC 3434 (TCC) applied.
(2) The concept of common law repudiation of a contract applied to the contract as a whole, there could be no partial repudiation. Even if the concept of repudiation could apply to the subcontract adjudication agreement, that agreement had to stay alive and be operable in any other disputes. In the absence of clear wording in the adjudication clause, it could not be said that the overall adjudication agreement could be broken down into separate agreements for each dispute referred to adjudication.
Since in the instant case, the subcontract was a construction contract as defined by the 1996 Act, the adjudication agreement in the subcontract could not in practice be repudiated. However, either party could still breach the subcontract adjudication agreement, which might sound in damages and which, in certain circumstances, could justify an injunction.
(3) In the instant case, although the defendant had deliberately breached the adjudication agreement that breach was not repudiatory. The parties had agreed that the adjudication was to be conducted under CEAP, obliging them to comply with that procedure. The defendant had failed to serve its referral documentation within the agreed timescale and the question of apparent bias on the part of the appointed adjudicator was therefore irrelevant. If such bias did arise, the breach would be nominal, attracting little if any damages because the parties go ahead with the adjudication in the face of such bias. Additionally, the claimant was challenging its jurisdiction and it might be that any damages would be small, if non-existent. Moreover, it was not the case that because one party alleged apparent bias that the other party had to accept that that was the case.
Karen Gough (instructed by Barton Legal, of Leeds) appeared for the claimant; Piers Stansfield (instructed by McGrigors LLP, of Glasgow) appeared for the defendant.
Eileen O’Grady, barrister
