Representatives of a subcontractor and its subsubcontractor had a telephone discussion. The subsubcontractor confirmed, the same day, by email, that a "final account sum" had been agreed. The subcontractor acknowledged the email and said it would prepare the paperwork and associated information to close out the account. It did not challenge the subsubcontractor's email and, months later, said it was awaiting head office sign off, but then issued a gross valuation very substantially less than the "final account sum" allegedly agreed and made no further payments. The subsubcontractor took its claim for the "final account sum" to adjudication but the subcontractor asked the court for a declaration that the adjudicator had no jurisdiction. It said that the claim did not arise under the subsubcontract but under the alleged standalone settlement agreement, so that adjudication did not apply. But was that right?
The judge said that, in adjudication cases, the courts should follow the House of Lords' ruling on arbitration clauses, that the parties, as rational business people were likely to have intended any dispute arising out of their relationship to be decided by the same tribunal. A dispute as to whether alleged contract entitlements have been settled in a binding way consequently arises "under" the original contract. It would be extraordinary and illogical if the parties or Parliament had intended that an otherwise properly appointed adjudicator would have jurisdiction to deal with a contractor's or subcontractor's payment entitlement except where there was a dispute as to whether that entitlement had been settled. If that was right, unless there was a separate agreement to refer the dispute to adjudication, one could never adjudicate in a construction contract on an interim or final account agreed in some binding way. That made commercial and policy nonsense when such agreements must occur all the time and should be encouraged and supported by retaining the right to adjudicate if there was a challenge to the settlement.