Grove Construction (London) Ltd v Bagshot Manor Ltd

The Claimant in this case was Grove Construction (London) Ltd (“Grove”), a contractor. The Defendant was Bagshot Manor Limited (“Bagshot”), which was the employer of Grove under a construction contract which had been assigned to it by Grove’s original employer, Bagshot Manor Developments Limited (“BMDL”). Grove sought the enforcement of an adjudicator’s decision dated 18 November 2024, in which it had been awarded £112,337.16 plus VAT from Bagshot for unpaid retention monies.

Grove had originally been employed by BMDL under a construction contract dated 20 April 2020, pursuant to which it agreed to carry out the design and construction works for 79 residential dwellings in a building known as Bagshot Manor. It carried out these works, which reached practical completion on 11 February 2022. The contractual retention period accordingly ended on 11 February 2023. However, shortly thereafter BMDL entered into administration, and on 21 July 2023 assigned the construction documents for Bagshot Manor, including the construction contract with Grove, to Bagshot by way of a deed of assignment. While the deed of assignment provided that Bagshot would give notice of the assignment to all parties to the construction documents within 10 days of the date of the deed, it only did so much later, on 22 February 2024. Grove then requested that Bagshot pay it the unpaid balance of its retention monies, which Bagshot refused. Grove subsequently referred a dispute to adjudication on 11 October 2024 – however, the nominated adjudicator held that they did not have jurisdiction. Grove then commenced a second adjudication on 17 October 2024. In this adjudication, the adjudicator accepted Grove’s argument that Bagshot stood in the shoes of BMDL for the purpose of liability for the retention, and awarded the claimed outstanding retention sum to Grove.

Bagshot refused to pay this sum, and Grove brought enforcement proceedings against Bagshot. In the enforcement proceedings, Bagshot echoed its submissions in the second adjudication, arguing that Bagshot had stepped into the shoes of BMDL and had assumed its obligations in respect of repaying the retention sum. At the outset, it must be noted that Grove accepted in the proceedings the fundamental point of law that only rights and benefits and not burdens, obligations and liabilities under a contract may be transferred by an assignment. As a result of this concession, the arguments that Grove was able to deploy in its favour were limited, and amounted to an attempt to convince the judge that the effect of the deed of assignment was to transfer sufficient rights held by the Claimant to permit the adjudication to be enforced:

1. Grove asked the judge to find that the assignment had inter alia also conferred on Bagshot all rights of action in the case, defending any claim arising out of a burden or an obligation originally on BMDL;
2. Grove asked the judge to interpret the clause of the deed under which Bagshot agreed to notify the parties to the construction documents as somehow creating an obligation under the Construction Documents not just importing a consistent mechanism; and
3. Grove also attempted to rely on the adjudication clause in the construction contract, which conferred on either party the right to refer any dispute to adjudication.

Bagshot’s argument in contrast was straightforward. As had been accepted by Grove, it argued that the law was clear that only rights and benefits and not burdens, obligations and liabilities under a contract may be transferred by an assignment. It was clear that the contract was assigned and not novated, as novation would have required the consent of all of the parties. In the absence of a novation, Bagshot will not have become a party to the contract between BMDL and Grove, and will not have been liable for BMDL’s obligations. The deed of assignment was clearly intended to effect an assignment in a perfectly standard way, there can be no doubt as to the intended effect.

The Judge considered there to be no merit in Grove’s position, while he found Bagshot’s arguments to be without flaw. He was entirely persuaded that the parties to the deed of assignment meant to assign no more and no less than BMDL’s benefits under the construction contract to Bagshot. Grove’s original contract with BMDL continued to subsist, and Grove’s right to refer a dispute to adjudication related to its contract with BMDL. A dispute with Bagshot did not, in the judge’s view, fall within the meaning of a dispute under the contract. Therefore, the judge held that the adjudicator had lacked jurisdiction and erred in law in finding that Bagshot had in effect stepped into the shoes of BMDL, and dismissed the application.

Primarily, this case underlines the need to carefully consider the contractual matrix prior to initiating an adjudication. In this case, the claimant referred a dispute to adjudication against a party that was not a party to the agreement that contained the adjudication provisions, and to which it had no contractual link. As a result, it has likely incurred considerable costs in attempting to bring an action, the limited prospects of which it should have been advised about at the outset.