Can you adjudicate at anytime – even under a settlement agreement?

Background

Raise Now Ealing Limited ("RNE") engaged London Eco Homes Limited ("LEH") on a project in West Ealing under a JCT Intermediate Building Contract with contractor’s design (the "Original Contract").

The Original Contract included an express right to refer disputes to adjudication and was subject to the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”). After various disputes arose, the parties entered into a settlement agreement in August 2023. This settlement agreement contained a schedule of payments to be made by RNE to LEH.

When RNE failed to make payment in accordance with the schedule under the settlement agreement, LEH referred the matter to adjudication. RNE challenged the adjudicator’s jurisdiction, arguing that the settlement agreement contained no adjudication clause.

The adjudicator rejected this challenge and found in favour of LEH. When RNE still failed to pay, LEH sought to enforce the decision by way of summary judgment.

The parties' arguments

1. RNE's position:
   1. The settlement agreement was a "free-standing" contract intended to "supersede and replace" the original contract
   2. No adjudication clause had been included deliberately
   3. The governing law and jurisdiction clauses indicated that disputes were to be resolved exclusively by the courts of England and Wales, excluding adjudication

2. LEH's position:
   1. The settlement agreement could not be understood or construed in isolation, but rather that it had to be seen in the context of the original contract
   2. LEH emphasised the courts’ increasing encouragement of alternative dispute resolution ("ADR"), referencing CPR r. 1.1(f), which promotes the use of ADR
   3. LEH argued it would be illogical for a contractor who settles a dispute to be in a worse position than one who does not

Judgment

Unusually and following further evidence RNE did concede that monies were due.

As such, the key issue for the court to consider was whether the adjudicator had jurisdiction. This turned on whether an adjudication clause was implied by statute in any event, or alternatively, whether the adjudication clause in the original contract survived for the purposes of the dispute referred to the adjudicator.

The court held:

1. There was no statutory right to adjudicate under the Construction Act as the dispute related to the provision of a warranty, not construction operations

2. However, the settlement agreement constituted a variation of the original contract, allowing the adjudication provisions in the original contract to apply

3. The use of governing law and jurisdiction clauses were "standard" and did not exclude the use of ADR

The court concluded, RNE’s jurisdictional challenge failed and LEH was entitled to summary judgment.

Key takeaways

1. The decision may be factually specific as the court considered the specific wording of the Original Contract and the settlement agreement to determine how they were connected.

2. Where parties intend for a settlement agreement to replace the original contract entirely - and exclude adjudication - they must include clear and express drafting to that effect. Ambiguity around dispute resolution mechanisms can lead to costly jurisdictional challenges.

3. The decision reinforces the court's pro-ADR stance continuing the general "…direction of travel of the civil law…towards encouragement of ADR". This aligns with the Court of Appeal decision in Churchill v Merthyr Tydfil [2023] EWCA Civ 1416 and BDW Trading v Ardmore [2024] EWHC 3235 (TCC).