Setting the record straight

Three weeks ago Tony Bingham reported on the Court of Appeal judgment in the adjudication case Ferson Contractors vs Levolux AT. The decision, one of only a handful on adjudication from the Court of Appeal, is important because it provides much needed guidance in an area of adjudication where there remained a significant level of confusion, namely enforcement of adjudicators' decisions. What the Court of Appeal has now decided, as a matter of public policy, is that an adjudicator's decision "trumps" everything else; any clause in a contract permitting payments to be witheld after an adjudicator's decision must be struck down or construed in such a way so as not to defeat the intention of parliament. In other words an adjudicator's decision must be complied with even if the contract says otherwise. As Tony put it: "Parliament's intention under the Construction Act was straightforward. It says in big red letters with a big red finger pointing to the big red letters: 'The decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration or by agreement'."

Tony then highlighted what he regarded as the "apparent" inconsistency between the Court of Appeal decision in the Ferson case with the High Court decisions in Bovis Lend Lease vs Triangle Development and Parsons Plastics vs Purac. The Bovis decision was the case in which His Honour Judge Thornton held that a party would not be required to comply with an adjudicator's decision (aside from grounds relating to jurisdictional procedural impropriety) where "the terms of the contract override the apparent obligation to make payment in accordance with the adjudicator's decision and … where the decision is overridden by another applicable adjudication". (In fact, while there had been another adjudication between Bovis and Triangle, on one view the decision did not override the first adjudication because it did not decide the issue of determination under the contract.)

The Parsons case, which appears to have influenced Judge Thornton in the Bovis case, was the decision in which the Court of Appeal found that the wording in that particular contract permitted a set-off to be made even though other provisions in the contract dealing with witholding notices had not been complied with.

In seeking to explain and reconcile the Parsons and Bovis decisions with the Ferson case, Tony rightly pointed out that the Parsons decision did not involve a construction contract to which the Construction Act applied. It could therefore be distinguished from the Ferson decision on the basis that the provisions in the contract were not inconsistent with the intention of the Construction Act and the Parsons case remains a decision on its own facts.

Tony is wrong, however, to use the same explanation to try to reconcile the Bovis decision with the Ferson case because the Bovis case did concern a contract to which the Construction Act applied. The project was for the conversion and refurbishment of a school into flats and was carried out under a JCT management montract. It was for this very reason, as Tony noted, that many commentators had been saying that the Bovis decision would have encouraged paying parties to write the type of deduction clause found in the the determination provision into their contracts. This would clearly have had the effect of driving a coach and horses through the adjudication provisions in the Construction Act.

It is not, therefore, possible to reconcile the Bovis and Ferson decisions, and the Court of Appeal has simply found that Bovis was wrongly decided. The purpose of section 108 was clear. It was a speedy mechanism to settle disputes and it was intended to lead to enforceable immediate payment obligations. If Judge Thornton's arguments had been correct, then the purpose of adjudication would have been defeated.

It is interesting to note that the Ferson decision now brings the English courts back into line with the position north of the border. There, the Outer House of the Court of Session decided in the case of A vs B on 17 December 2002 that as the terms of section 108(3) of the Construction Act required all applicable contracts to provide that an adjudicator's decision be binding, any attempt to delay the enforcement of an adjudicator's decision by contract would be prohibited.