The concept that the decision of an adjudicator will be binding on an interim basis is well established. There is a statutory basis for this: section 108(3) Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996) makes clear that an adjudicator’s decision will be binding unless and until such time as it is superseded by legal proceedings, arbitration or agreement. This case looks at the circumstances in which the parties can agree to make the decision final, and how that might be achieved.
Residential occupiers are excluded from the Act's provisions under section 106. As a result, it is typical to see residential occupiers enter into standard form building contracts which expressly include for the right to refer disputes to adjudication. Far less common is a situation whereby the parties to a residential occupiers’ construction contract neglect to draft for adjudication in the contract itself and instead enter into an adjudication agreement after the dispute arises. This is, however, the situation which arose in Khuranas and another v Webster Construction Ltd  EWHC 758 (TCC).
In this case, a dispute arose over building works at a property in Bowdon, Cheshire. The decision does not go into any detail as to the nature of the works carried out, but it is apparent that the contractor considered the works satisfactorily completed and accordingly claimed final payment and release of the retention. The home owners disagreed; claiming both that there were a number defects and that the project was in delay. In all, the disputed sum seems to have been in the region of £40,500.
Having not catered for adjudication in the contract (and without statutory right to refer the dispute to an adjudicator), the parties agreed - in writing - to refer the matter to adjudication under the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998/649). When responding to a suggestion by Webster’s solicitors that the adjudicator’s decision “shall be binding on the parties”, the home owners’ solicitors used the same words; and agreed that the decision “shall be binding on the parties”. When the adjudication was started in August 2014, Webster’s solicitors again stated the adjudicator’s decision “would be binding on the parties on a final basis”. No objection to this statement was received.
The adjudicator found in favour of Webster, prompting the home owners to start court proceedings to determine the final account. Unsurprisingly, Webster objected; arguing that the matter had already been dealt with by the adjudicator and that his decision was "finally binding". After hearing the arguments and reviewing contemporary correspondence, HHJ Stephen Davies held that the home owners had expressly agreed that the adjudicator’s decision would be “final”, that the adjudicator’s decision would therefore be considered binding and that the Court was not at liberty to revisit that decision.
This case is a clear indication that when negotiating an ad-hoc adjudication agreement, parties should at all times be wary of the phrase "shall be binding”. The Court made clear that without the inclusion of this phrase, the issue in Khuranas v Webster would not have arisen. In the absence of a written agreement to the contrary, use of the Scheme "carried with it an implicit but obvious proposal that... the decision would only be temporarily binding".