Banner Holdings v Colchester Borough Council discusses whether a clause in the CG Works/1 contract in respect of final and conclusive decisions falls foul of the Construction Act. Here, CBC contracted with Banner for the construction of a visual arts centre. CBC purported to determine Banner’s employment under the contract due to defective works. Banner therefore issued proceedings in respect of its alleged losses. Meanwhile CBC commenced adjudication proceedings seeking a decision that Banner’s employment under the contract had been validly terminated. The contract stated that the Adjudicator had power to vary or override any decision of CBC under the contract except in relation to, amongst other things, termination. Banner then sought a declaration from the Court that the Adjudicator did not have jurisdiction because he was being asked to “vary or override” CBC’s own decision to terminate Banner’s employment under the contract.
This argument was rejected on the basis that all the Adjudicator was being asked to do was confirm the validity of CBC’s decision.
Banner also argued that the limitation of the Adjudicator’s powers was not compliant with the Construction Act because it did not allow any dispute to be referred to adjudication. CBC’s response was that if the clause was not compliant with the Act, then the adjudication provisions in the Scheme for Construction Contracts would apply, which would confer jurisdiction on the Adjudicator. However, Banner pointed out that the Scheme had a similar limitation in that: “the Adjudicator may…open up, revise and review any decision…unless the contract states that the decision…is final and conclusive.”
The Judge, without the merest hint of condescension, pointed out that if the Scheme applied, then the offending clause in the contract would not!
Comment: The Judge was quite clear that there was clearly a dispute over the validity of the determination of Banner’s employment under the contract, and that was a dispute which could be validly referred to adjudication. If he was wrong, and the Scheme applied, then the dispute could be referred to adjudication anyway. The Judge also passed comment on whether partially non-compliant contractual adjudication provision should be replaced wholesale or piecemeal by those in the Scheme. Despite some quite clear case law on the point, the judge surprisingly gave only a “tentative view” that the Scheme applies wholesale as that would provide certainty.
