London Eco Homes Limited v Raise Now Ealing Limited

In November 2021, the Defendant employed the Claimant as a building contractor on a construction project in West Ealing, pursuant to a JCT “Intermediate Building Contract with contractor’s design” [95ff] (“the original contract”). In accordance with s. 108 of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”), Art. 7 [107] and cl. 9.2 [166; 114] of the original contract, it contained an express right to refer a dispute arising for adjudication. Various disputes did arise, but those were the subject of a negotiated settlement reduced to writing on 8^th August 2023 [72 – 85] (“the settlement agreement”). Following non-payment by the Defendant of the settlement sum in accordance with agreed instalments, an amended schedule was further agreed on 25^th September 2023 [46].

Payments were not maintained by the Defendant in accordance with the agreed amended schedule and the Claimant consequently made a referral to Adjudication by a Notice dated 15^th May 2024. The Defendant raised a challenge to the Adjudicator’s (Footnote: ¹) jurisdiction on the grounds that there was no provision for adjudication in the settlement agreement, which challenge was rejected by him, going on to find that the Claimant was entitled to a payment from the Defendant of £95,000, being the outstanding balance under the settlement agreement, together with interest, and also that the Defendant should be responsible for paying his fees.

These sums went unpaid and the Claimant accordingly issued Part 7 enforcement proceedings on 7^th October 2024, seeking a total of £125,748.11. At the same time, the Claimant’s application for summary judgment on the claim was referred to me and I gave directions for the filing and service of further evidence in advance of a hearing listed on 11^th December 2024. For various procedural reasons, the substantive hearing did not come finally to be heard until 3^rd March 2025.

The application is supported by the witness statements of Phil Speak dated 26^th July 2024 and Abbas Bahremi-Jovein of 22^nd January 2025. There is no witness evidence on behalf of the Defendant. I have benefited from the hearing and authorities bundles and skeleton arguments from both sides, together with oral submissions, for which I am grateful. I particularly commend Mr Saggar

Although, if legally represented, I might have heard from the Defendant first, in the circumstances I heard first from Mr Davison.

Accordingly, the Claimant accepts that if I were to conclude that the settlement agreement is a standalone contract, then the claim and the application would fail. However, Mr Davison submits that the Defendant’s argument here should not be accepted as the type of technical defence with can otherwise oust the presumption of enforcement of an adjudicator’s decision, in particular in the light of the more recent approach of the Courts in similar situations, exemplified, he argues, in Murphy v Maher [2016] EWHC 1148 (TCC) (Sir Robert Akenhead) and BDW Trading v Ardmore [2024] EWHC 3235 (TCC) (Joanna Smith J).

As such, Mr Davison poses the question broadly, “Did the referred dispute arise out of a construction contract for construction operations?” If it did, he submits then the adjudicator had jurisdiction.

In support of his urged answer in the affirmative, he asks the Court to note firstly that the parties to the contract were specifically alive to ADR methods of resolving disputes arising, namely positively including determination of disputes by Arbitration pursuant to Art. 8 [109] and specifically stating the particularised nominating body (RIBA) for adjudication purposes at cl. 9.2.1 [114]. The parties were, he says, in essence agreeing to creating their own specific rules as to ADR options, which is indicative of an overall agreement to utilise ADR wherever possible.

Most importantly, Mr Davison asks the Court to find that the settlement agreement cannot be understood or construed in isolation, but rather that it has to be seen in the context of the original contract. At the most basic level, it seems to me that what is being said here is that, as the settlement agreement operates on its face by way of an agreement mutually to terminate the original contract [ 73 – d .], and reference is made to “the final account” in relation to the original Contract [ 73 – 2.1 ], this cannot properly be understood without reference being made to the Termination clauses at Section 8 of the original contract [160 ff] and as such the “Entire Agreement” clause in the settlement agreement [77]:-

“7.

Entire agreement

This agreement constitutes the entire agreement between the parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to the JCT Contract and the Project.”

has to be so construed in context.

More fundamentally, Mr Davison also argues that, irrespective of whether the dispute should or needs to be regarded as “under” the original contract, the settlement agreement is also capable of being construed relevantly as a construction contract within the meaning of the Act. Clause 2.7 of the settlement agreement,

“2.7

The signed basement warranty carried out by Pudlo for the basement works and the waterproofing for the basement will be provided to RNE within 5 working days of the receipt of the 1st Payment. The warranty will be filled in with all necessary information relating to the site. Should the Pudlo warranty provided not be accepted by the Building Surveyors or Consultants associated with the Project i.e. ACS, JHAI or any other approved body, LEH will carry out all necessary works or modifications in conjunction with Pudlo to ensure that sign off is achieved at no further cost to RNE. Should this not be possible or if

the basement warranty is not provided, or provided in a form that is not accepted this would constitute a breach of this agreement and the value of the Termination Payment will be £Nil, therefore all future payments under Schedule 2 will not be due by RNE to LEH. In addition, any payments made by RNE to LEH at the time of this breach will be owed back to RNE immediately.”

he notes, makes provision for the Claimant to carry out construction works, should there be an issue with the basement warranty which is so remediable. In this way, the Act would apply to imply the power to refer to adjudication in any event.

In any event, notes Mr Davison, although clause 5.3 and Schedule 3 to the settlement agreement seek to settle the Claimant’s rights arising out of the original contract, they do not attempt to resolve any of the Defendant’s rights, neither, pursuant to clause 5.4, is the Claimant prevented by the wide wording therein, from pursuing the Defendant for the purposes of enforcing the settlement agreement, which right is expressly preserved.

In support of his overall theme of jurisdiction being conferred, Mr Davison therefore contends that the old approach of a narrow construction of the statutory phrase (s. 108(1) of the Act), “a dispute arising under the contract” as noted at para. 7.40 of Coulson on Construction Adjudication, whereby, firstly the Court should consider whether the second agreement can be construed properly as a variation of the first (Coulson @ 7.42) should no longer apply, in particular along the lines of the decision in Murphy. In that case, there was a dispute as to whether the final account under the original sub-contract had been settled. As summarised at para. 7.44 of Coulson,

“Sir Robert Akenhead held that the adjudication clauses in the sub-contract survived and were wide enough in their effect to cover a dispute arising under the alleged settlement agreement. That settlement agreement undoubtedly arose in connection with the original sub-contract. The judge decided that the settlement agreement ‘operated as a variation of the original contract and was subject to the same adjudication provisions.’

Mr Davison asks for a similar approach here, noting Sir Robert Akenhead’s approach to commercial common sense and his findings on the relevance and applicability of the “Fiona Trust” principles set out by the House of Lords, by way of logical extension from the context of arbitration to that of adjudication in addition, in concluding,

“32.

… if (the Claimant) was right, save by ad hoc agreement, one could never adjudicate in a construction contract on an interim or final account which had been agreed in some binding way; that makes commercial and policy nonsense in circumstances in which such agreements must occur all the time and should be encouraged and supported by retaining the right to adjudicate if one party seeks to challenge the settlement on one basis or another.”

He also notes, for balance, para. 33,

“There is of course logic in the proposition that where a claim has been unarguably settled in a binding way, there can no longer be a subsisting dispute which is referable to adjudication (or arbitration); that is different to the position here.”

Mr Davison then goes on to place reliance upon BDW Trading, where the adjudication clause was restricted to a dispute arising “under” the contract, the relevant issue being whether a claim under the Defective Premises Act 1972 could give rise to such a dispute. At para. 51 of her judgment Joanna Smith J recites Sir Robert Akenhead’s approach to the applicability of the Fiona Trust principles to adjudication and she also notes, at para. 53, Lord Briggs’ observations in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 @ para. 41,

“I am not persuaded that the statutory compulsion lying behind the conferral of the contractual right to adjudicate points at all towards giving the phrase ‘a dispute arising under the contract’ a narrow meaning, by comparison with a similar phrase in a contract freely negotiated. The fact that, after due consideration of the Latham Report, Parliament considered that construction adjudication was such a good thing that all parties to such contracts should have the right to go to

adjudication points if anything in the opposite direction.”

On reaching her conclusion that the Fiona Trust principles do apply in respect of adjudication provisions at para. 55ff, Joanna Smith J rejected the semantic and “creature of statute” arguments to the contrary in favour of the application of “business common sense” and logicality.

In conclusion, Mr Davison reminds the Court that this broad approach to construction in the field of ADR chimes in nicely with the Court’s enhanced general approach procedurally to not merely encouraging, but also “promoting or using” it in accordance with the revised overriding objective at CPR r. 1.1(f). It cannot be sensible, he urges, that an unpaid contractor who settles in this way is then placed in a worse position than if it had not settled.

Mr Saggar maintains that the parties agreed to enter into a free-standing settlement agreement intended to supersede and replace the original contract and, indeed, (although it would not be appropriate for me to take this into account when properly construing the settlement agreement, not being part of any objective analysis), he asserts, by way of submissions, that on advice he specifically decided not to include adjudication clauses.

He places particular emphasis on the “Governing Law” and “Jurisdiction” clauses at Arts 8 and 9 of the settlement agreement [77].

“8.

Governing law

This agreement and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales.

9.

Jurisdiction

Each party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this agreement or its subject matter or formation (including non-contractual disputes or claims).”

Thus, says, Mr Saggar, a Part 7 claim on the merits of the dispute between the parties in relation to any breach of cl. 2.7 of the settlement agreement, is the agreed way to resolve the issues between the parties, to the exclusion of any right to adjudicate.

The effect of section 1 of the settlement agreement,

“1.

Termination Date

1.1

The JCT Contract is agreed to have been mutually terminated with effective from 22^nd June 2023 (Termination Date).

1.2

The Termination Letter is deemed to have been accepted and served correctly in accordance with the JCT Contract.

1.3

The Notice of Default is deemed to have been accepted and served correctly in accordance with the JCT Contract.”

he argues is that the terminated contract is now replaced with a standalone agreement

Mr Saggar then provided, by way of submissions, some background as to why the Defendant disputes having to pay the termination payment, in the context of cl. 2.7, above., namely that it became clear that the envisaged warranty, which would be essential to render the basement works of any commercial value, would not be able to be provided and that, in those circumstances, the failure of the Claimant to fall back onto providing an acceptable insurance-backed guarantee entitled the Defendant to treat the termination payment as nil and to reclaim monies already paid pursuant to the settlement agreement.

Mr Saggar disputed, again by way of submissions, that there had been any deliberate inclusion of adjudication provisions in the original contract.

He sought to distinguish Murphy by reference to para. 34, where Sir Robert Akenhead found that the agreement under examination was a variation of an earlier agreement, on the basis of his “standalone” arguments. He also asks the Court to contrast the situation here with the contractual terms under analysis in McConnell v National Grid [2006] EWHC 2551 (TCC), referred to by Sir Robert at para. 21 of his judgment, where there was specific reference to the original contractual terms continuing with full force and effect, save to the extent that they were varied by the later agreement.

The original contract in the instant case, he says, was terminated and therefore cannot be said to have survived for the purposes of providing jurisdiction for adjudication.

Mr Saggar further rejects the applicability of the Fiona Trust principles. These arose, he notes, in the context of agreeing to arbitration, a consensual process to be written into a contract as a method of ADR. This was not written into the settlement agreement and therefore is indicative of the parties not being minded to engage with ADR at the time of the settlement agreement.

Mr Saggar also reminds the Court, through the vehicle of section 24.16 of Emden (which edition Mr Davison points out pre-dates BDW) that,

“If the Settlement Agreement stands entirely separate from the original contract and is not itself a construction contract, it does not carry with it a statutory right of adjudication.”

Finally, Mr Saggar contends that the provision for carrying out works within cl. 2.7 of the settlement agreement is not sufficient for the settlement agreement to become a construction contract for the purposes of Part II of the Act.

The adjudicator was initially asked by the Claimant to order the Defendant to pay the Claimant, inter alia, the sums outstanding under the settlement agreement, the parties being in dispute as to whether those sums were in fact owed in consequence of the operation of cl. 2.7 of that agreement [32 – 36].

However, unusually, following further evidence, the Defendant conceded that the monies were due [38 para. 55],

“Therefore the Responding Party now accepts that the Referring Party is no longer in breach of its obligations under the Settlement Agreement, and therefore it will arrange for payment of the balance due under that Agreement.”

Nevertheless, the adjudicator went on, in the context of the Defendant’s application for its costs of the adjudication process, to find that the Claimant had not in fact been in breach of its obligations under cl. 2.7 at any point [43 para. 77].

Whilst the Defendant makes reference in these proceedings to its ongoing contentions in relation to cl 2.7 (whether or not consistent with its conceded position in the adjudication) and its potential counterclaim, I am satisfied that the only issue which is capable of defeating the application for summary judgment by way of enforcement of the adjudicator’s decision is the jurisdictional one, namely whether there is an adjudication clause implied by statute in any event or alternatively whether the adjudication clauses in the original contract, namely at Article 7 [107] and cl. 9.2.1 [114] survive for the purposes of the dispute referred to the adjudicator, there being no express adjudication provisions in the settlement agreement. If they do not somehow survive and the settlement agreement is a true standalone agreement, then, as the parties appear to agree, the application must fail.

I will turn first to whether the settlement agreement itself should properly be regarded as a construction contract, thus engaging the right to refer such a dispute to adjudication pursuant to statute in any event.

Section 104 of the Act provides as follows:-

“104 Construction contracts.

(1)

In this Part a “construction contract” means an agreement with a person for any of the following—

(a)

the carrying out of construction operations;

(b)

arranging for the carrying out of construction operations by others, whether under sub-contract to him or otherwise;

(c)

providing his own labour, or the labour of others, for the carrying out of construction operations.

(2)

References in this Part to a construction contract include an agreement—

(a)

to do architectural, design, or surveying work, or

(b)

to provide advice on building, engineering, interior or exterior decoration or on the laying-out of landscape,

in relation to construction operations.

…

(5)

Where an agreement relates to construction operations and other matters, this Part applies to it only so far as it relates to construction operations.

An agreement relates to construction operations so far as it makes provision of any kind within subsection (1) or (2).”

Section 105 provides a very comprehensive definition of what amount to and what are not “construction operations”.

In my judgment, it is apparent that cl. 2.7 of the settlement agreement did make provision for construction operations, namely for all necessary works or modifications which might be required for a sign off on the basement warranty. Beyond this, however, the agreement related to other matters which clearly were not construction operations, namely the residual terms of settlement agreed to. As such, in my view, section 104(5) of the Act is engaged. As the dispute between the parties arose not out of the provision of “necessary works or modifications”, but rather out of the timing and/or acceptability of the provision of the basement warranty, I find that the dispute referred was not sufficiently connected with or related to construction operations to allow for section 108 to be engaged. Accordingly, I do not find that there is a statutorily implied adjudication clause. For completeness, in that we are not dealing here with a dispute as to whether a collateral warranty is or was a construction contract, I do not find Mr Davison’s reliance on Abbey Healthcare v Augusta [2024] UKSC 23 to be of direct assistance in my analysis.

I then move to the application of the original adjudication clauses to the settlement agreement.

In my view, it should be noted at the outset that the adjudication provision at Art. 7 of the original contract mirrors the statutory wording in terms of any dispute arisingunder the contract (my emphasis). This may usefully be contrasted, it seems to me, with the arbitration clause at Art. 8, which makes reference to any dispute arising out of or in connection with (my emphasis) the contract. Therefore, it seems to me that an objective observer might be right to conclude that the parties, in positively applying Art. 8 [109] should be taken to have chosen to adopt that specific wording and, similarly, in inserting cl. 9.2.1 [114] to have been content with that specific, but different, wording for adjudication.

It is noteworthy in this regard, in passing, that the adjudication clause in Murphy did actually extend the statutory right from a dispute merely arising “under” the sub-contract to a dispute arising “in connection with” the sub-contract (Murphy @ para. 4). Additionally, I note that Murphy was in relation to a dispute as to whether there was in fact a final settlement, as opposed to the instant case, where the dispute was as to how the acknowledged settlement was envisaged to work.

Thus, it seems to me that at this stage it remains germane to consider whether the dispute referred can properly be said to be a dispute “under” the original contract and in particular by way of variation of it, rather than the more recent broader approach, drawing upon commercial common sense and logic.

In my judgment, the settlement agreement can properly be construed as constituting a variation of the original contract, for the following reasons:-

Insofar as the phrase “and after this agreement”, if properly understood, together with further “full and final” and other “waiver of rights to sue” clauses, might give rise to concerns that the Claimant had thereby waived any rights of enforcement, this is addressed by an exclusion clause at cl. 3.1 [74], “but excluding any claims by LEH to enforce this agreement” and further by way of cl. 5.4 [75], “(save for the purposes of enforcing the terms of this agreement)”.

Moving to the “Entire agreement” clause 7 [77], in my view the only way that this clause can be read in a sensible way, that is to make commercial sense, in that it is clearly an agreement as to the termination of and not in substitution for the original contract, is to imply the words “termination of the” before “JCT Contract” or otherwise construe the clause in this way. The clause might then be sensibly read or understood thus:-

“7.

Entire agreement

This agreement constitutes the entire agreement between the parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to the termination of the JCT Contract and the Project.”

Finally, in relation to Mr Saggar’s points here, clauses 8 and 9 of the settlement agreement, on Governing law and Jurisdiction, do not carry with them, in my view, any particular magic in terms of the issue of contractual construction before the Court. They are rather a standard way of making it clear that the law to be applied to any dispute is to be English Law and that any such dispute, if it reaches the courts, is agreed to be tried in the English Courts. It would not be right, in my judgment, to construe these as deliberately excluding the ability to resort to ADR, wherever otherwise appropriate. In any event, the latter is a somewhat circular argument, given the power of the English civil courts, under rule 3.1(2)(o) of the Civil Procedure Rules 1998 to order parties to engage in ADR.

As such, it is not necessary for me to give any definitive views on Mr Davison’s arguments on a broad construction of “under the contract”. I have already flagged up some issues of note in paragraphs 37 and 38 above, but it does, nevertheless, seem to me that the direction of travel of the civil law is towards encouragement of ADR, not least since the decision of the Court of Appeal in Churchill v Merthyr Tydfil [2023] EWCA Civ 1416 and the subsequent changes to the rules of Court, and that the decision in BDW is very much in line with such momentum.

In conclusion, I am not satisfied that there is a real prospect of success in the Defendant’s jurisdictional argument and accordingly the Claimant is entitled to summary judgment.