J Murphy & Sons Ltd v W Maher and Sons Ltd

Case reference: 
[2016] EWHC 1148 (TCC)
Monday, 23 May 2016

Key terms: 
Adjudicators' powers and duties - Construction contracts - Final payments – Jurisdiction - Settlement

The claimant, J Murphy & Sons Ltd engaged  the   defendant,   W   Maher and Sons  Ltd to provide labour,  plant material and supervision in respect of spoil removal,  piling,  shaft and tunnel excavations at Trafford  Park, Manchester. J  Murphy & Sons Ltd, a subcontractor and W Maher and Sons Ltd, a sub-sub- contractor were parties to a contract which incorporated NEC 3 Engineering and Construction Subcontract form (2005 with amendments from 2006 and 2011). This included option W2 which provided for adjudication for any dispute ‘arising under or in connection’ with the contract and in the Subcontract Data section the adjudicator nominating body was identified as the TCC.

The defendant submitted a number of payment applications under the sub- sub-contract and when payment was not forthcoming, the defendant commenced adjudication. Initially,  it issued a notice of adjudication under the sub-sub- contract, but due to a concern in respect of a jurisdictional challenge in relation to  the nomination of the adjudicator, it subsequently  issued a second notice under the Scheme.

Sir Robert Akenhead considered that, despite an inadequate nominating body being specified, the adjudication clauses in the contract were compliant with ss 108 (1)–(4) of the Housing Grants, Construction    and   Regeneration    Act 1996, as these did not require a named adjudicator appointing entity. The Judge also said it was clear the parties had agreed unequivocally that there could and would be an adjudication and accepted that the adjudication clauses were broad enough to cover a dispute arising under the settlement agreement which “undoubtedly arose in connection with the original sub-sub-contract.”

Sir Robert Akenhead concluded that the contractual adjudication provisions did not offend the scheme and were therefore capable of applying to the adjudication.

The Judge went on to consider the position in the event that the jurisdiction of the adjudicator was merely ‘under the contract’.  The Judge considered that the Lord Hoffman’s decision in Fiona Trust & Holding Corporation and Ors v Privalov and Ors [2007] UKHL 40 “strongly signposted” that the court should take a commercially   sensible approach to adjudication clauses and held that “it follows that a dispute as to whether all or some of the alleged entitlements which one contractual party has against the other has been settled in a binding way arises “under” the original contract.”

Obiter, the court also confirmed that, if it had to decide the issue it would have held the alleged settlement agreement was a variation of the sub-sub-contract. The case law to date also confirms that unless parties enter into a full and final settlement of all disputes arising under or in connection with a contract, the court is likely to construe their agreement as a variation to the underlying contract.

The   practical effect  of  this  case is that  it  confirms that  contractors and subcontractors can still take advantage of the right to adjudicate for disputes arising from agreements  as to interim or final accounts  where such agreements are considered binding in  some way. Sir Robert Akenhead also indicated he would “be sympathetic to an application for permission to appeal, albeit only on the basis that it would be helpful for there to be an appellate decision on the issues raised and that it is arguable that previous decisions may leave some uncertainty in this arguably important area of construction law.”

Key contact

Tel: +44 (0)20 7421 1986
Tel: +44 (0)20 7421 1986