Settling a dispute by adjudication

Settling a dispute by adjudication In January 2001 I reported the case of Shepherd Construction -v- Mecright, which considered whether a dispute arising out of a settlement agreement could be resolved by adjudication.
The dispute arose out of a subcontract for the design and erection of steelwork. The parties had signed a settlement agreement in which Mecright had agreed the sum of £366,000 in full and final settlement of all its claims under the subcontract. That agreement resulted in an immediate payment of about £75,000, but Mecright continued to be unhappy and wrote a couple of letters voicing discontent that the amount of the agreement was not as large as it might have been. Otherwise nothing happened until four months later when, spurred by the advice of claims consultants, Mecright commenced adjudication proceedings.
Payment dispute
In its notice of adjudication, Mecright's claims consultants indicated that the dispute was "your failure to make proper payment to our client on the above project". Neither in that letter, nor in the subsequent referral notice sent three days later, was there any mention of the fact that there had been a settlement agreement. This manoeuvre was transparent in its purpose. Mecright's claims consultant recognised that, without the consent of both parties, a dispute arising out of the settlement agreement would not be referable to adjudication.
His Honour Judge Humphrey Lloyd QC was disdainful of this approach. He commented that "if the purpose of adjudication is to provide a swift and summary decision about matters in dispute, one expects a party seeking adjudication to present its case in full, not to hold anything back and to be open and honest in its presentation". Judge Lloyd was clear that there could be no valid adjudication. A dispute about a settlement agreement could not be a dispute under the subcontract since the effect of the settlement agreement was that it replaced the original agreement to the extent to which it applied.
These matters came up again earlier this year in the case of Westminster Building Company -v- Andrew Beckingham. Westminster undertook to carry out extensive refurbishment works at Beckingham's property in Wilmington Square, London WC1. The works were commenced on receipt of a letter of intent from Beckingham indicating that formal contract documentation would be drawn up in due course. Indeed, on the day that work started on site, Beckingham's building surveyors had sent to Westminster a copy of the JCT Intermediate form of contract ready for signature. Westminster had duly signed and returned these documents as requested. The documents were never signed by Beckingham but nevertheless the work proceeded and interim payment certificates were issued as if the contract was based upon the JCT form.
In due course, disputes arose and the parties signed a written agreement in an attempt to resolve certain issues, including that the total amount payable for the works should not exceed £300,000. Apparently ignoring that agreement, Beckingham's surveyors issued payment certificates exceeding £300,000. Perhaps unsurprisingly, Beckingham refused to pay. The matter soon became the subject of adjudication.
The adjudicator decided that Beckingham should pay Westminster the amount certified in the interim certificates and, since Beckingham refused to comply, the decision came before His Honour Judge Anthony Thornton QC for enforcement. Judge Thornton had no doubt that the adjudicator's approach had been entirely correct and that enforcement should be granted.
Contract conclusion
Judge Thornton was clear that a contract incorporating the JCT Intermediate form had been concluded. Westminster had forwarded signed contract documents to Beckingham's surveyors as requested. That act had constituted an offer to carry out the works under that form of contract. Although he had not countersigned these documents, Beckingham had allowed works to proceed, remained silent as to his concerns about the contract and had proceeded throughout the works as if the JCT form was applicable. By doing that, Beckingham had accepted the form of contract by his conduct and had waived any precondition that it should not take effect until he had signed the contract documentation.
As far as the £300,000 capping agreement was concerned, Judge Thornton was clear that this was not a full and final settlement of the type examined in the Shepherd case. It was intended merely to be an agreement varying the terms of the underlying contract. The result was that the adjudicator had jurisdiction to deal with the disputes arising under the contract and to take into account the effect as he saw it of that variation agreement.
Adjudicator's decision
As it happens, the adjudicator had decided that the agreement to cap the amount of the contract sum was unenforceable because it was not supported by consideration. Judge Thornton therefore concluded that in so deciding, the adjudicator had applied the correct test to determine the effect of the variation agreement and his decision was therefore unimpeachable. In consequence, the decision of the adjudicator was binding on Beckingham and judgment was granted for Westminster in the sum claimed.