From a common sense perspective the Court considered that there was a great deal to recommend it following, in relation to adjudications, the same approach as the House of Lords adopted for arbitration clauses in The Fiona Trust. The Court’s reasoning as to why it was of that opinion concluded with the following trenchant words:
“It would be extraordinary and illogical if the parties here or Parliament had intended that an otherwise properly appointed adjudicator would have jurisdiction if addressing what entitlement a contractor or sub-contractor might have to be paid in all circumstances save in relation to where a dispute arises as to whether that entitlement had been settled. If Murphy 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 must be encouraged and supported…”
The Court’s Likely Future Approach and Lessons for the Future
In light of the Court’s decision, it will be a brave party who now seeks to resist the enforcement of an adjudication decision concerning a settlement agreement on jurisdictional grounds. However, that is still possible because a future Judge at first instance will not be bound to follow the decision just made. The Court indicated that it would be sympathetic to an application for permission to appeal because it would be helpful for there to be a Court of Appeal decision on the issues raised. Given the facts of Murphy v Maher, however, an appeal may not occur. The Court noted, as an aside, that if it had to decide the issue, it would have said that the alleged settlement agreement was a variation of the earlier construction contract. Also, as noted, it was held that the NEC3 Option W2 did in fact apply.
Whilst deference must of course be shown to any House of Lords decision, The Fiona Trust is not of applicable outside of the sphere of dispute resolution provisions. There are many instances where the Courts have had to make findings (not involving arbitration clauses) concerning the interpretation of a contract’s term’s scope and where the inclusion of the formula “in relation to” or “in connection with” has been under the spotlight. Here the inclusion of such words has been of significance and the justification for an ultimate finding as to the term having a broader ambit. That, it is submitted, will remain the case generally. However, there is every prospect that an appellate Court would see all dispute resolution provisions as being in a special category and so endorse the Court’s approach for adjudication clauses in Murphy v Maher. More particularly, on The Fiona Trust basis that widely construing an arbitration clause (and the same logic is equally applicable to an adjudication clause), irrespective of its language, satisfies the “it goes without saying” officious bystander test as to what the contracting parties must surely have intended.
Until there is a Court of Appeal decision on this issue, it would be prudent to ensure that express adjudication provisions within construction contracts are worded in the widest terms. This will avoid the possibility that, after reaching a settlement to “buy out” the time and costs risks of protracted proceedings, those advantages prove to be illusory because there is no swift route to enforce the settlement.
Author Profile
Tim Mould is a Partner at Goodman Derrick LLP in London. He specialises in contentious and non-contentious construction and engineering projects in the UK and internationally. He has acted for employers, contractors, consultants, insurers and sureties.
To learn more about Tim, visit the firm's website: www.gdlaw.co.uk