Michael John Construction Ltd v Golledge [2006] EWHC 71

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

Adjudication is a procedure which is effective between parties to a construction contract.  In cases where unincorporated association enter into construction contracts it is not always clear as to who, personally, is liable under the contract.  This can give rise to difficulties if, mistakenly, a party attempts to bring an adjudication against a person who is not a party to that contract.  On the facts of the case, the claimant could elect to enforce the relevant adjudicator’s decision against either the association’s trustees, as principal, or against the person who had signed the contract (either as their agent or, on a personal basis).  The judge rejected the defendants’ other defences to enforcement.  The judge also refused a stay of execution as the precarious financial position of the successful party was brought about by the non-payment of amounts properly owing by the unsuccessful party.

HHJ Coulson QC

Technology and Construction Court

The contractor entered into a contract for building works at a rugby club in Cardiff.  The contract value was just under £700K.  The form of contract incorporated the JCT Intermediate Form.  The contract named the club as the Employer but had been signed by a Mr Matthews (one of the defendants, who at the time was a director of the club but not a trustee) for and on behalf of the club.  The club was unincorporated. 

There was a dispute concerning sums due to the contractor.  The contractor sought to recover sums due to it by commencing an adjudication against Mr Matthews and another person, Mr Norman.  The contractor apparently believed that these two gentlemen were either the trustees of the rugby club, or they were authorised to act on behalf of the trustees.  Both of them were in fact by this stage trustees of the club.  The adjudicator awarded the contractor some £124K.  However, this amount was not paid.

In seeking to enforce the £124K debt against Mr Matthews and Mr Norman, the contractor learnt the identities of the trustees of the club at the time the contract was entered into.  Those trustees were three persons who were not parties to the adjudication.  When these three people were approached about the money that was owing to the contractor, they denied liability.  The contractor commenced a second adjudication, this time against the three original trustees and Mr Matthews.  The adjudicator was the same adjudicator as for the first adjudication. In that adjudication, the defendants argued that the only people that could be pursued by the Contractor were all the Members of the Club. The adjudicator obtained an opinion from Counsel on this issue, which concluded that the contractor could elect either to sue the three trustees, as principals, or alternatively the Mr Matthews as agent. 

The respondents in the second adjudication chose to rely solely on jurisdictional arguments in their defence and did not deal with the merits of the contractor’s claim.  Unsurprisingly, the result of the second adjudication was virtually the same as the first, i.e. the contractor was successful, this time against the three original trustees and Mr Matthews.  This time the size of the award was slightly higher, at around £134K, with the increase being due to interest on the amount owing to the contractor, and the fact that the adjudicator awarded that the unsuccessful parties were to pay his fees and expenses.  Again the sums awarded were unpaid.

The contractor sought to enforce the adjudicator’s decisions in the Technology and Construction Court.  The defendants were the three original trustees and Mr Matthews. On the central legal issue, being who was the appropriate party or parties against whom the adjudication proceedings should have been commenced, HHJ Coulson QC held that Counsel’s opinion (sought and relied upon by the adjudicator in the second adjudication) was correct; under the particular rules of the Club, it was the trustees who were authorised to enter into contracts on behalf of the members of the Club; the trustees would have a personal liability under such contracts.  Mr Matthews was clearly acting as the agent of the three trustees at the time that the contract was made.  The contractor could therefore elect to pursue enforcement either against the three original trustees who entered into the contract with the contractor (as principals) or against Mr Matthews as agent for the principals and/or who had entered into the contract personally.

The defendants resisted the enforcement of the first adjudication on the grounds that the adjudicator exceeded his jurisdiction because he found that Mr Matthews was liable to the Claimant on the false premise that Mr Matthews was a trustee at the time that the contract was made.  HHJ Coulson QC held that this was wrong for the reasons outlined above, and made the point that Mr Matthews never raised any such jurisdictional arguments during the first adjudication.  Nonetheless, as he had decided to enforce the second adjudication HHJ Coulson QC declined to enforce the first.

In relation to the second adjudication, the defendants resisted enforcement on various grounds, including the following:  

  1. They argued that the notice to refer was invalid because it asked the Adjudicator to decide at least two disputes – the correct identity of the employer under the contract and how much the employer owed to the contractor.  HHJ Coulson rejected this on the grounds that it was clear that there was only one dispute and that was how much the three trustees and Mr Matthews (who were the named respondents in the adjudication) owed to the contractor. 
  2. The defendants also argued that the adjudicator did not have jurisdiction to decide the same issues twice, i.e. in the first adjudication and then in the second adjudication.  Again this was rejected by the judge: the two adjudications may have involved the same underlying issue, i.e. the contractor’s entitlement to payment, but there were additional respondents (i.e. the trustees) in the second adjudication; there was no risk of any “double jeopardy”.
  3. The defendants also alleged that there was a reasonable apprehension of bias on the adjudicator’s part as the adjudicator had decided the first adjudication one way, and then he had effectively closed his mind in the second adjudication and for that reason decided it substantially the same way as he did the first adjudication.  The judge held that there was no credible evidence of the adjudicator having taken a blinkered view of the arguments in the second adjudication; he had allowed the respondents every opportunity to express their arguments.


It was therefore held that the determination made by the adjudicator in the second adjudication was enforceable against the trustees of the rugby club.  The trustees applied for a stay of execution of judgment, on the basis that the contractor was not in a strong financial position.  This application was rejected: there was no evidence that the contractor was in a worse financial position than when it contracted with the defendants; to the extent that the contractor’s financial position had deteriorated, it was evident that the trustees’ failure to pay the amounts owed to the contractor had contributed to that deterioration; further, the judge was not convinced that there was a credible counterclaim that would cancel out the sums found due to the contractor by the adjudicator, nor was he convinced that the club seriously intended to pursue any arbitration against the contractor.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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