Ferson Contractors Ltd v Levolux A.T. Ltd [2003] EWCA Civ 11

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A provision in a construction contract governed by the HGCR Act 1996, however clearly worded, that entitles a party to withhold against and/or not to pay an Adjudicator's decision because, say, the contract has been terminated, is inconsistent with the HGCR Act 1996 and therefore invalid.

Court of Appeal

22 January 2003

The facts and decision at first instance are set out on page 114. The Defendant ('FC') appealed unsuccessfully from that decision.

The Court of Appeal approved Judge Wilcox's finding that it was implicit in the Adjudicator's decision that the Claimant ('LAT') was entitled to suspend the works and the purported determination, based on LAT's wrongful suspension of the works, was invalid.

FC relied upon a passage in the judgment of HHJ LLoyd QC in KNS Industrial Services (Birmingham) Ltd v Sindall Ltd (page 37):

If therefore by the time an Adjudicator makes a decision requiring payment by a party the contract has been lawfully terminated by that party (or that party has real prospects of success in supporting that termination) or some other event has occurred which under the contract entitles the party not to pay then the amount required to be paid by the decision does not have to be paid.

FC also relied upon the judgment of HHJ Thornton QC in Bovis Lend Lease v Triangle Developments Ltd (page 129) where he stated:

Where other contractual terms clearly have the effect of superseding, or provide for an entitlement to avoid or deduct from, a payment directed to be paid by an Adjudicator's decision, those terms will prevail.

The Court doubted the above statements of Judge Thornton QC and (implicitly) Judge LLoyd, so that they can no longer be considered good law. If those statements were correct the intention of Parliament in enacting the HGCR Act 1996 would
be defeated

The Court confirmed that the purpose of the adjudication regime (which it described as draconian) is swift and effective dispute resolution with an enforceable decision pending what is likely to be complex and expensive litigation or arbitration.

A provision in a construction contract governed by the HGCR Act 1996, however clearly worded, that entitles a party to withhold against and/or not to pay an Adjudicator's decision because, say, the contract has been terminated, is inconsistent with the HGCR Act 1996 and therefore invalid.

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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