UK: Enforcing Adjudicators´ Decisions Against Householders – Update

Last Updated: 25 May 2006

By Sam Bailey, Associate in the UK Construction & Engineering Group at Pinsent Masons

Judge Toulmin's landmark decision in the case of Picardi v Cuniberti that an adjudicator's decision was unenforceable as the adjudication clause in a standard form contract fell foul of the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations) was not followed in Lovell Projects Limited v Legg and Carver and Westminster Building Company Limited v Beckingham. However, the Court of Appeal has recently considered this issue again in Bryen & Langley Limited v Boston. The Court of Appeal has found that the key factor is whether it can be said that the contract term in question has been imposed on the consumer or not. In cases where the consumer himself has proffered the standard form contract, he will not subsequently be able to argue the terms in question have been imposed on him and will therefore not be able to rely on the Regulations to argue that an adjudicator's decision against him is unenforceable.

It should be remembered that construction contracts with residential occupiers are excluded from the scope of Part 2 of the Housing Grants Construction and Regeneration Act 1996. The building contractor therefore has no right to commence an adjudication against a householder for whom he has undertaken construction work at their dwelling unless he can point to a contract that contains an adjudication clause. In the Picardi case, Mr Picardi commenced enforcement proceedings in the High Court to enforce an adjudicator's award in his favour. The Cunibertis successfully argued that the RIBA Conditions of Engagement which Mr Picardi had proffered had not been incorporated into the contract between the parties. Judge Toulmin went on to consider their argument that even if the RIBA conditions had been incorporated the adjudication clause therein was unenforceable because it fell foul of the Regulations. Regulation 5 provides:

"5(1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer".

Schedule 2 of the Regulations sets out a non-exhaustive list of terms may be regarded as unfair. The Cunibertis' pointed to the term set out at letter "q" which states:

"excluding or hindering the consumer's right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, unduly restricting the evidence available to him or imposing on him a burden of proof which, according to the applicable law, should lie with another party to the contract".

Judge Toulmin concluded that the adjudication clause within the RIBA terms was unenforceable under the Regulations. He stated:

"I conclude that a procedure which the consumer is required to follow, and which will cause irrecoverable expenditure in either prosecuting or defending it, is something which may hinder the consumer's right to take legal action. The fact that the consumer was deliberately excluded by Parliament from the statutory regime of the HGCRA reinforces this view. Costs in an adjudication can be very significant."

In the subsequent case of Lovell Projects Limited v Legg & Carver, Lovell applied for summary judgment in order to enforce an adjudicator's decision requiring Mr Legg and Ms Carver to pay for work carried out at their home under a JCT Minor Works Contract (which included an adjudication provision). Legg & Carver contended that the adjudicator's decision was unenforceable because the adjudication provisions within the JCT Minor Works Contract fell foul of Regulation 5(1).

Judge Moseley QC dismissed the arguments raised by Legg & Carver and held that there was no imbalance in the rights and obligations of the parties for the purpose of Regulation 5. The Judge found that Legg & Carver had insisted that the JCT Minor Works Contract was used for the works and there was therefore no unfairness in Lovell referring the dispute arising out of Legg & Carver's non-payment of its account to adjudication. Like the Cunibertis, Legg & Carver had sought to rely on letter "q" of Schedule 2 to the Regulations. The Judge rejected this argument and held that the adjudication provisions within the JCT Minor Works Contract did not exclude or hinder a consumer's right to take legal action or exercise any other legal remedy as adjudication is only binding until the dispute is resolved by legal action, arbitration or agreement.

In his judgment, it could not be said that the terms in the JCT Minor Works Contract required Legg and Carver to take disputes exclusively to arbitration nor did the terms seek to restrict the evidence available to them or alter the burden of proof. Further the Judge found that to be unfair a term must cause a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer and that this must be contrary to the requirement of good faith. The judge referred to the definition of good faith in the judgment of Lord Bingham in Director General of Fair Trading v First National Bank:

"of fair and open dealing. Openness requires that the term should be expressed fully, clearly and legibly containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not whether deliberately or unconsciously take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations."

The Judge found that there had been no breach of the requirement of openness as the adjudication clause was fully, clearly and legibly set out in the JCT Minor Works Contract and contained no concealed pitfalls or traps. He found that Lovell had not taken advantage of Legg and Carver's lack of experience, weak bargaining position etc. On the contrary, the form of contract was insisted upon by Legg and Carver who were knowledgeable business people. Judge Moseley accepted the correctness of Judge Toulmin's decision in Picardi v Cuniberti but held that it had no application to the case where the term in question was contained in a form of contract that had been insisted upon by the consumer.

Judge Moseley's reasoning was followed almost entirely by Judge Thornton QC in the case of Westminster Building Company Limited v Beckingham. This case was brought by Westminster to enforce the decision of an adjudicator that Mr Beckingham should pay £122,000 due under a building contract for refurbishment works at his house. One of the arguments raised by Mr Beckingham was that the effect of the Regulations was to make the contractual adjudication clause unenforceable. The Judge found that the contract between the parties (IFC 98) did contain a contractual adjudication clause. Further the Judge found that the contract was insisted upon by Mr Beckingham's agents (who were chartered surveyors) and that Westminster did no more than accept the contract terms offered by them and there was no need therefore for Westminster to draw Mr Beckingham's attention to the potential pitfalls associated with the adjudication clause. For this reason the clause did not contravene the requirement of good faith as defined by Lord Bingham in Director General of Fair Trading. Judge Thornton shared Judge Moseley's view that the clause did not lead to a significant imbalance in the parties' rights to the detriment of Mr Beckingham and did not significantly exclude or hinder Mr Beckingham's right to take legal action or any other legal remedy or restrict the evidence available to him. The adjudication clause was therefore binding on Mr Beckingham.

These three cases were recently considered by the Court of Appeal in the case of Bryen & Langley Limited v Boston. Bryen & Langley brought an appeal against the dismissal of its claim for summary judgment by Judge Seymour QC. They had sought to enforce an adjudicator's award that Mr Boston was liable to pay £65,000 due under a JCT building contract for work at his house. The judge at first instance found that the JCT form had not been incorporated into the building contract and therefore the parties were not bound by the adjudication provisions contained therein. Significantly, the Court of Appeal found that Mr Boston had, through his appointed agents, proffered the JCT form of contract and that the contract concluded by the parties did incorporate the JCT terms, including the adjudication provisions.

The Court of Appeal then moved on to consider whether the adjudication provisions within the JCT form were unfair terms for the purpose of the Regulations. The Court of Appeal chose to focus on Regulation 5(1) and the fact that this makes it clear that a term which has not been individually negotiated will only be considered unfair if it causes an imbalance between the parties' rights and is contrary to the requirements of good faith. The Court of Appeal found that it was also necessary to consider Regulation 6 which requires the assessment of the unfairness of the contractual terms to take into account all of the circumstances attending the conclusion of the contract. The Court of Appeal also considered Lord Bingham's judgment in Director General of Fair Trading. At paragraph 45 of the Court of Appeal's judgment, Mr Justice Rimer stated:

". . . in assessing whether a term that has not been individually negotiated is "unfair" for the purposes of Regulation 5(1) it is necessary to consider not merely the commercial effects of the term on the relative rights of the parties but, in particular, whether the term has been imposed on the consumer in circumstances which justify a conclusion that the supplier has fallen short of the requirement of fair dealing. The situation at which Regulation 5(1) is directed is one in which the supplier, who will normally be presumed to be in the stronger bargaining position, has imposed a standard-form contract on the consumer containing terms which are, or might be said to be, loaded unfairly in favour of the supplier. The Picardi case was one in which the terms had been imposed by the claimant architect (in that case, the supplier). In the Lovell case the terms had been imposed on the supplier by the employers' (i.e. the consumers) architect, the Judge finding not only that they caused no significant imbalance to the employers, but that nor in the circumstances in which the contract came to be made was there any question of any lack of good faith or fair dealing by the supplier contractor. HH Judge Thornton QC arrived at a similar result, in like circumstances, Westminster Building Company Limited v Beckingham.

In my judgment, Mr Boston faces exactly the same difficulties in relation to his Regulation 5(1) argument as did the other consumers in the Lovell and Beckingham cases. His problem is that the relevant provisions were not imposed upon him by B&L, the supplier. It was Mr Boston (the consumer), acting through his agent Mr Welling who imposed them on the supplier since they were specified in Mr Welling's original invitation to tender . . ."

The Court of Appeal's decision has therefore left open the door for householders to argue that adjudication clauses within standard form contracts are unenforceable in circumstances where the contract has been imposed upon them by the contractor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.