Summary

The TCC held that the right to adjudicate provided for in the Construction Act for disputes arising “under” a construction contract is to be interpreted broadly in line with the approach adopted in relation to arbitration clauses in the Fiona Trust Case.

Background facts

The decision

To reach a decision, the TCC had to determine whether a dispute regarding the alleged settlement agreement was a dispute “under” the sub-sub-contract.

The TCC considered a number of authorities but adopted the commercial and logical approach in the Fiona Trust case, which related to an arbitration agreement rather than an adjudication clause. The Fiona Trust case provided that:

"the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction."

The TCC adopted the same common sense approach to avoid the unattractive situation where all disputes arising out of settlement agreements in relation to construction contracts, which contain adjudication provisions, cannot themselves be referred to adjudication. Accordingly, the TCC held that the dispute regarding the alleged settlement agreement was a dispute “under” the sub-sub-contract.

The Judge stated that he considered the agreement reached in relation to the final account to be a variation to the contract in any event, reached as a means of resolving the payment claim under the sub-sub-contract.

Commentary

The practical implication of the TCC's decision is that all disputes arising out of settlement agreements concerning construction contracts, which include an entitlement to adjudication, may now be adjudicated. This will be a welcome decision for parties seeking to enforce the terms of a final account settlement.

In his closing comments, the Judge did state that he would be "sympathetic" to an application for permission to appeal his decision on the basis that it would be helpful for an appellate decision on the issues, given their importance in construction law.