Uncovering a provision to make the adjudicator's decision final
Having recently contemplated the uncertain nature of adjudication, I realise I may have done it something of a disservice. Tucked away in the machinery of the Housing Grants Act is a littleknown provision which enables disputing parties, if they want to, to agree the adjudicator's decision will be final in determining their dispute.
Such an agreement would put paid to the uncertainty that usually follows those adjudicator's decisions to which one of the parties vehemently objects, usually, but not always, on grounds other than a straightforward reluctance to part with their cash. Traditionally, the victor would then have to commence enforcement proceedings in the courts, the success of which would depend upon the ingenuity of the arguments put forward by the reluctant camp.
By agreeing that the adjudicator's decision would be final, the parties can spare themselves a second round in court and save the consequential costs and delay. There are those who would say that you would need your head examining if you were prepared to put your faith in the outcome of an adjudication - particularly at the contract stage, when you have no idea of the type of dispute, the sums likely to be at stake or the calibre of adjudicator who may be appointed to decide it.
But those who drafted the standard GC/Works subcontract were not to be put off by such arguments. The subcontract provides that, where a dispute is referred to adjudication, the adjudicator's decision is unchallengeable. It also requires both contractor and subcontractor to comply forthwith with any adjudicator's decision and if in doubt to submit to summary judgment. Contractual provisions such as this ought to put paid to any arguments from the reluctant camp. Pay up on the adjudicator's decision - end of story.
But as the recent Court of Appeal decision in Ferson Contractors v Levolux AT (judgment 22.1.03) demonstrates, even a contract that precludes any argument, will not prevent the reluctant camp from having a go.
The main contractor, Ferson, engaged Levolux as subcontractor to supply and fit brise soleil and louvre panelling pursuant to the terms of the GC/Works subcontract. During the course of the works, Levolux applied for payment of £56,413.
Ferson paid it only £4,753, relying upon a 'withholding notice' in respect of the balance. Levolux stopped work. Ferson threatened to determine the contract if it did not resume. Levolux referred the dispute to adjudication and Ferson determined the contract.
The adjudicator, well-known construction solicitor John Redmond, found that Levolux was entitled to almost all of the money claimed because Ferson's withholding notice was invalid.
Pursuant to the terms of its contract, this ought to have resulted in a payment from Ferson to Levolux of about £50,000 plus interest and costs or, at worst, summary judgment for those sums.
Ferson, however, being the reluctant sort, did not pay, but went to court instead. How did it propose to get around the binding nature of the adjudicator's decision? It argued that another provision of the contract provided that determination of the subcontract suspended entitlement on all sums of money otherwise due to the subcontractor. Pending a decision as to whether Ferson was entitled to determine the contract, the provisions relating to determination overrode those relating to adjudication, it said.
Happily for the GC/Works subcontract, for the subcontractor and the cause of adjudication generally, both the judge and Court of Appeal held that the adjudicator had, by implication, decided Ferson was wrong to determine the contract by deciding that the subcontractor was entitled to payment.
Thus Ferson was wrong to have withheld the money and the subcontractor entitled to suspend work. The purported determination of the subcontract had no contractual effect. In any event, it said, the contractual provisions that cancelled out payment in the event of a determination did not apply to money due under an adjudicator's decision. As one of the appellate judges concluded: 'I have no doubt that parliament's intention was to avoid just the kind of arguments to which we have listened in the present case'.