Adjudication - Binding on the Parties?

In Khurana and another v Webster Construction Ltd [2015] EWHC 758 (TCC) the Court have held that the parties had agreed an adjudicator's decision would be binding.

It is common place that an adjudicator's decision is "interim-binding". That is, it is binding until the dispute is finally determined by legal proceedings, arbitration or agreement.

Residential occupiers often sign a standard form contract containing an adjudication clause, ensuring they have a right to refer disputes to adjudication. It is less common to see an adjudication agreement entered into after a dispute arises. However, that is precisely what occurred in the case of two property owners and their building contractor, when a dispute arose over building works at a property in Cheshire.

The parties had collectively agreed to refer the dispute to an adjudicator using the Scheme for Construction Contracts (England and Wales) Regulations 1998.

After the adjudication, the property owners started court proceedings to have the sums due under the contractor's final account determined. The contractor objected, arguing that the adjudicator had already dealt with the matter and his decision was "binding", meaning "finally binding".

After careful consideration of the parties' correspondence and the applicable law it was held that the parties had agreed to be bound in this way and the parties could not now go behind such agreement. If the parties had not agreed to be bound, the issue could not have arisen because the proposal to use the Scheme carried with it an implicit proposal that the decision would only be temporarily binding.

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While the decision in this matter does not create any new legal precedents, it is a reminder that when you enter into any type of adjudication agreement, you need to be certain that if you use the phrase "shall be binding", you understand its effect.

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