It is not unusual for contracts between residential occupiers and contractors to include adjudication provisions. If no adjudication provisions are included then adjudication will not be available to either party.
What is unusual is for a residential occupier and contractor to enter into an adjudication agreement after a dispute has arisen. This is precisely what happened when the Khuranas and Webster Construction agreed that a dispute could be referred to adjudication in accordance with the Scheme rules.
In the adjudication, Webster was successful and on enforcement obtained summary judgment. However, a stay of enforcement was granted on the provisos that the Khuranas (a) paid monies into Court, and (b) commenced Court proceedings to have the dispute finally determined.
The Khuranas complied, but Webster sought to have the Court proceedings struck out on the basis that the adjudicator's decision was "finally binding".
The parties' agreement to adjudicate had been set out in correspondence with the Khuranas proposing that "the procedure should be conducted in accordance with the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended) save that the decision…shall be binding on the parties." [emphasis added]
Webster agreed that "the decision…shall be binding on both parties".
The Court considered (a) the construction of the words used and applied the objective "reasonable person" test, (b) the fact that if the adjudicator's decision was finally binding this would be at odds with the Act and the Scheme, and (c) the effect of the words in light of the Unfair Terms in Consumer Contracts Regulations 1999.
The Court gave significant importance to the use of the words "save that the decision…shall be binding…" as they had the effect of departing from the default position that an adjudicator's decision under the Scheme would only be temporarily binding.
In the circumstances, the adjudicator's decision had permanently binding effect and the Khuranas' court proceedings were struck out.
Comment
Whilst the decision does not create any new law, it demonstrates the importance of choosing your words carefully. Had the reference to the Scheme not been qualified, the issue would not have arisen given that the under the Scheme an adjudicator's decision would have had only temporarily binding effect. It is of course, entirely possible that the parties did intend for the adjudicator's decision to be finally binding, but the Khuranas tried to play a "Get out of jail free" card when the decision went against them.
