Lovell Projects Limited v Legg and Carver [2003]BLR 452

This summary was provided by CMS Cameron McKenna LLP.

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

For the terms of an adjudication clause to be unfair under the Unfair Terms in Consumer Contracts Regulations 1999, the clause must cause a significant imbalance of the parties' rights and obligations to the detriment of the consumer, contrary to the requirement of good faith.

HHJ Mosley QC, Technology & Construction Court

July 2003

This case concerned an application for summary judgment to enforce an adjudication award.

L&C were residential occupiers for the purposes of the HGCRA 1996 ("the Act") with the consequence that the Act was inapplicable to the contract. However, the Standard Form of JCT Minor Building Works contract (with amendments 1 to 11) entered into by the parties incorporated provisions for adjudication similar to those contained in the 1996 Act.

The main defence raised by L&C was that they were not bound by the adjudication provisions in the contract by reason of the Unfair Terms in Consumer Contracts Regulations 1999. L&C explained that no one had brought the adjudication clause in the Minor Works Contract to their attention even though the evidence suggested that L&C through their architect insisted on adopting the Minor Works form of Contract. L&C therefore contended that the terms providing for adjudication were unfair and not binding on them under the provisions of the Regulations.

HHJ Mosley QC explained that to be unfair under the Unfair Terms in Consumer Contracts Regulations 1999, the terms of the adjudication clause must cause a significant imbalance of the parties' rights and obligations under the contract to the detriment of the consumer. This imbalance must be caused by the adjudication provisions and be contrary to the requirement for good faith. In his view, neither requirement was satisfied in the present case. The adjudication terms applied equally both to Contractor and Employer: both were bound by the terms.

Equally important were the requirements of good faith. There had been no breach of the requirement of openness: the adjudication terms were fully, clearly and legibly set out in the contract and contained no concealed pitfalls or traps. In respect of fair dealing, the contract was insisted upon by the architect on behalf of L&C; they were knowledgeable business people who had engaged successfully an architect and a contract administrator and had solicitors whom they had the opportunity to consult and whom they may have indeed consulted. Consequently there was no departure from "good standard of commercial morality and practice".

It was further alleged that the adjudication was not binding on the parties because the adjudicator had no jurisdiction to act, there being no "dispute or difference" for him to resolve. This argument was dismissed as at the material date of the adjudication three disputes or differences were live.

A final argument was that L&C were entitled to set-off debts allegedly owed by LP to L&C against the amount ordered by the adjudicator. In these circumstances it was necessary to consider whether the contract allowed any set-off in the absence of a withholding notice. The contract contained clear unequivocal words whereby the parties agreed that a set-off would only be permitted when a withholding notice had been served. In this case there had been no withholding notice.

For the reasons above, there was no defence to the claims to recover the full amount awarded by the adjudicator.

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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