The Khuranas (the “Claimants”), the occupiers of a substantial residential property in Bowden, Cheshire, engaged Webster Construction (the “Defendant”) to undertake building works to the property. A dispute arose between the parties towards the end of the project – the Defendant thought it had satisfactorily completed the works, and that it was therefore entitled to final payment and release of the retention, but the Claimants maintained that a number of items of the works were unsatisfactory and that the works were in delay.

The parties subsequently decided to enter into an adjudication agreement, under which they agreed that the dispute would be referred to adjudication using the Scheme for Construction Contracts 1998 (the “Scheme”). The parties entered into this agreement because the dispute resolution clause in their contract was unclear and uncertain – it was described by the court as an ‘agreement to agree’.

During negotiations between the parties as to the form and content of the agreement, the Defendant’s solicitors suggested that the Scheme should be used, and also that the decision of the adjudicator “shall be binding on all the parties”. In response, the Claimants’ solicitors agreed that the decision shall be binding on all the parties”. The adjudication was commenced in August 2014, and the Defendant’s solicitors again emphasised at that point that the decision of the adjudicator “would be binding on the parties on a final basis”; the Claimants’ solicitors did not disagree, nor did they make any contrary suggestions.

Following the adjudication, the Claimants commenced court proceedings to have matters in the adjudication – namely, the sums due under the contractor’s final account – determined. In response, the Defendant argued that the matter had already been dealt with by the adjudicator and that his decision was “finally binding”.

Following consideration of the principles of construction as reviewed in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, HHJ Stephen Davies in the Manchester District Registry of the TCC held that the parties had agreed the adjudicator’s decision would be finally binding. The judge reached this finding on the basis that the adjudication agreement between the parties used the term “shall be binding”. Without that term, the proposal to use the Scheme would have evidenced an agreement between the parties that the decision would only be temporarily binding:

“… both parties must be taken to have been aware that the proposal for a Scheme adjudication carried with it an implicit but obvious proposal that, unless expressly stated to the contrary, the decision would be only temporarily binding. It follows… that the words “save that the decision… shall be binding on the parties” could only sensibly have been intended to derogate from that default provision.”