Domsalla (t/a Domsalla Building Services) v Dyason [2007] EWHC 1174 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

The withholding provisions in the JCT Minor Works (1998 Ed.) were held to be unfair towards a residential occupier (i.e. a consumer) and in breach of EU consumer laws.  In addition, HHJ Thornton QC thought that the court had the power to intervene and overturn an adjudicator’s decision if the adjudicator got the facts or law wrong, provided the adjudicator’s jurisdiction arose under a contract to which the HGCRA did not apply.

HH Judge Thornton QC - Queen's Bench Division, Technology and Construction Court
 
Background

Mr Dyason’s home was destroyed by fire.  His insurers accepted liability under the insurance policy and appointed a contract administrator and loss adjustor to manage the reinstatement of the house.  On the contract administrator’s advice and ‘as agent’ Mr Dyason entered into a contract with Domsalla incorporating the JCT MW 98 form. 

During the course of the project, the insurers avoided Mr Dyason’s insurance policy on bad faith grounds.  Mr Dyason became responsible for making the interim payments.  However, in the meantime, the project had suffered from delays and poor workmanship on the part of Domsalla.  Mr Dyason withheld several interim payments from Domsalla, but without issuing withholding notices as set out in the contract.  The matter was referred to adjudication, at which Domsalla was successful.  Domsalla applied to the court for enforcement of the adjudication decision. 

Decision

Unfair terms in the JCT contract

The court found that:

  • The withholding clause was on the facts of this case an unfair term.  Domsalla knew that Mr Dyason had had no involvement in the negotiation of the contract nor in the management of the project as the contract administrator had been responsible for this.  He had not been aware of the existence of the clause, he had no right to issue withholding notices nor any authority to instruct the contract administrator to do so (the contract administrator was instructed by the insurers).  It would be unfair in these circumstances for Mr Dyason to be bound by the provisions relating to withholding.
  •  The adjudication clause was not an unfair term in a contract between a contractor and a residential occupier.  It did not cause a significant imbalance in the parties’ rights or obligations.


Enforcement of adjudicator’s decision refused

The judge held that an adjudicator could not by wrongfully deciding that a particular term was fair preclude a consumer’s statutory rights where the term was in fact unfair.  Furthermore, on deciding that the withholding provisions were binding on Mr Dyason, the adjudicator had shut out defences of abatement and set off that had been raised by Mr Dyason.  This was both procedurally unfair and had resulted in the adjudicator not deciding all of the matters referred to him for decision.

Interestingly, HHJ Thornton QC commented in his judgment that, where the jurisdiction of the adjudicator arises under a contract to which the HGCRA does not apply (as was the case here), the court may review and overturn the adjudicator’s decision if he has got the facts or the law wrong.  This is a departure from what HHJ Thornton QC referred to as the doctrine of unreviewable error, which generally restricts the court’s power to refuse enforcement of an adjudication decision to cases of procedural unfairness or where the adjudicator has decided a question which was not referred to him.

The court refused to enforce the adjudicator’s decision.

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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