Case No A50MA136 
Neutral Citation Number: [2015] EWHC 758 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
TECHONOLOGY AND CONSTRUCTION COURT

Manchester Civil Justice Centre,
1 Bridge Street West, Manchester M60 9DJ

Date: 20 March 2015 
Before:

HIS HONOUR JUDGE STEPHEN DAVIES 
SITTING AS A JUDGE OF THE HIGH COURT

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Between:

(1) ANJALI KHURANA
(2) MOHIT KHURANA
Claimants
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WEBSTER CONSTRUCTION LIMITED
Defendant

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Tina Ranales-Cotos (instructed by Blackstone Solicitors, Hale) for the Claimants
Samuel Townend (instructed by Gorvins Solicitors, Stockport) for the Defendant

Hearing date: 10 February 2015
Supplemental written submissions filed 16 and 18 February 2015
Judgment circulated in draft: 3 March 2015 
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JUDGMENT
Introduction

1.	The claimants are the owners of a substantial detached house in Bowdon, Cheshire, and the defendant is a building company.  In April 2010 the claimants and the defendant entered into a contract for construction works at the property (“the construction contract”).  In October 2013, acting through their solicitors, they entered into an agreement to determine a dispute which had arisen between them by adjudication (“the adjudication agreement”).  In September 2014 the appointed adjudicator, Mr Peter Dale, made a decision in relation to that dispute (“the decision”).  In November 2014 HHJ Raynor QC decided that the decision should be summarily enforced but, due to the defendant’s financial circumstances, stayed execution on conditions that the claimants: (a) paid the sum decided due by the adjudicator into court; and (b) commenced court proceedings in relation to the matters in dispute by 12 December 2014.  The claimants complied with both conditions, but the defendant now applies to stay or dismiss this action, being the court proceedings thus commenced.  

2.	The issues which arise on the application are:

(a)	Whether the parties agreed that the decision should be finally binding upon them; and if so

(b)	Whether some or all the matters advanced by the claimants in this action have been finally determined by the decision, so as to preclude them from advancing them in these court proceedings. 

3.	Issue (a) requires the court to decide the true construction of the adjudication agreement.  It also requires the court to consider the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCR”) when making that decision.

4.	Issue (b) requires the court to consider and compare the nature of the dispute referred to adjudication and the nature of the claims advanced in this action.  

5.	The application was argued on 10 February 2015, and was adjourned to allow counsel to research and make representations in writing as to the impact, if any, of the UTCCR upon this matter, being a point which was raised by the court during the course of the hearing.  I received and considered written submissions in accordance with the timetable directed, and now produce this judgment.  I am grateful to Ms Ranales-Cotos, counsel for the claimants, and Mr Townend, counsel for the defendant, for their oral and written submissions.

6.	For the reasons which follow, I am satisfied that the defendant’s application is well-founded and that no part of the claim should be allowed to proceed further.

The circumstances in which the parties agreed to adjudication 

7.	The construction contract is in a pre-printed form entitled "Large Works Contract", and is stated to be intended for use on projects exceeding £5,000 between a private home owner and a builder.  There is no evidence as to the source of that pre-printed form, which is not one with I have previously encountered, or as to who proposed its use in this case.  It contains a provision for termination by either party for cause. It provides that in such an eventuality the builder is entitled to be paid for all works and materials on-site at the time of termination, and further provides that:

“If an agreement cannot be reached as to how much is owed the services of an independent quantity surveyor (who is acceptable to both parties) should be sought and both parties should agree in writing to abide by his figure. Both parties will meet the cost."

8.	There is a similar, but not identical, provision for resolution of any post-completion "disagreement regarding the standard of work". There is, however, no dispute resolution provision of more general application.

9.	The defendant proceeded with the construction works but, by late 2011 or early 2012, the parties were in dispute, with the defendant claiming that it had satisfactorily completed the works and was entitled to payment under its final valuation and to release of retention, and the claimants complaining that the works had not been fully completed, that there were a number of items of unsatisfactory work, and that the project was in serious delay due to the defendant’s defaults.

10.	By September 2013 the defendant had instructed solicitors, Gorvins Solicitors of Stockport, who proceeded to serve statutory demands upon the claimants, alleging that they owed the defendant the sum of £40,653.13. The claimants had also instructed solicitors by this stage, Blackstone Solicitors of Hale, who sent a letter dated 27 September 2013 challenging the valuation on a number of grounds, including allegations that certain items of work had not been completed, allegations of defective work and delay, allegations that the claimants had suffered substantial losses as a result, and an allegation that after taking all these matters into account there was nothing due to the defendant.  The claimants did not positively assert that they had, and would pursue, a counterclaim, but expressly reserved the right to do so.  The letter set out the claimants' position that it was an abuse of process to proceed with a statutory demand in such circumstances, and concluded as follows:

“If your client considers that it has a genuine claim then it should in accordance with the contract appoint an independent quantity surveyor."

11.	That provoked a response from Gorvins dated 30 September 2013 in which, having said they would take instructions on the contents of Blackstone's letter and would not issue bankruptcy petitions in the meantime, they said as follows:

"In the event … that [the] dispute … is not capable of resolution by further dialogue, our client is prepared to agree to resolution of the dispute by an independent quantity surveyor subject to certain clarifications to the contractual procedure being agreed.

In the first instance, in the event that it is not possible to agree an independent quantity surveyor that is acceptable to both parties, we seek your confirmation that either party may request that the President of the RICS make an appropriate appointment.

Secondly the contract is silent as to the relevant procedure to be adopted by the independent quantity surveyor. We seek your confirmation that the procedure to be adopted by the independent quantity surveyor should be conducted in accordance with the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended) save that the decision of the independent structural quantity surveyor shall be binding on the parties.

We are instructed that if you agree to the above procedural clarifications we are to forthwith withdraw the strategy demands to allow matters to progress either by way of further dialogue or by reference to an independent surveyor.”

12.	Over 3 weeks later, on 24 October 2013 Blackstone responded, having taken their clients instructions, as follows:

“1.	On the basis of your client withdrawing the statutory demands our clients agree to the appointment of a quantity surveyor being made in accordance with the Scheme for Construction Contracts … and that the decision of the quantity surveyor shall be binding on both parties.

2.	In the event that the parties are unable to agree an independent quantity surveyor, we confirm our agreement that a request may be made to the President of the RICS to make an appropriate appointment.

Please confirm that your clients has now withdrawn the statutory demands.”
 
13.	By letter dated 5 November 2013 Gorvins responded, confirming that the statutory demands were withdrawn on that basis.

14.	Unfortunately no agreement could be reached, and finally in July 2014 Gorvins served notice of adjudication.  There is no need for me to refer to the detail of subsequent events, since it is common ground that the agreement to refer the dispute to adjudication was concluded by the exchange of correspondence in autumn 2013 and that subsequent events cannot assist in construing the effect of that agreement.  However it is worth noting, because it has some relevance to the argument in relation to the UTCCR, that when Gorvins served an amended notice of adjudication on 6 August 2014 the accompanying letter, referring to the agreement made in October 2013, stated in terms that it had been agreed that the adjudicator’s decision “would be binding on the parties on a final basis”, and that Blackstone did not suggest to the contrary.   

Issue (a) - did the parties agree that the adjudicator’s decision should be finally binding upon them?

The applicable legal principles

15.	It is common ground that the starting point is that the adjudication agreement is to be construed in the same way as any other contract.  The relevant principles are to be found in Chitty on Contracts (31st ed.) at §12-41 onwards.  Lord Clarke JSC conducted a detailed review of the principles in Rainy Sky v Koomin [2011] 1 WLR 2900, at [§14-30], and §21 and §23 are of particular assistance in this case.   

“21.	The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.

23.	Where the parties have used unambiguous language, the court must apply it. …”

16.	Other principles of construction relevant to my task in this case are as follows:

(1)	The subjective intentions of the parties are irrelevant; the court’s task is to identify their objective intentions by ascertaining what a reasonable person in the position of the parties would have understood the words used to mean;

(2)	The post-contract conduct of the parties is irrelevant to the construction of the contract; if the construction of the contract, objectively ascertained, is “X”, it cannot avail a party to say that the other party subsequently said, or acted on the basis, that it was “Y”.

(3)	Even though the immediate object of inquiry is the meaning of an isolated word or clause, the whole of the contract must be considered in endeavouring to interpret that word or clause: Chitty [§12-063].  All parts of the agreement must be given effect, where possible, and no part should be struck out or nullified unless impossible to reconcile with another more express part: per Sir John Romilly, MR, in Re Strand Music Hall Company Ltd (1865) 35 Beav 153, p.856. 

17.	During the course of the hearing a question arose as to whether or not there is a principle of construction which should be applied in this case that clear words are necessary before the court should hold that a term of a contract has ousted either party’s unrestricted right of access to the court.  Neither counsel has been able to produce an authority which directly addresses this particular point.  There are authorities, referred to in Chitty [§16-045 - 47] and in Lewison: The Interpretation of Contracts (5th ed.) [§12-19], which tend to suggest that this should be the approach of the court, although the discussion is more in the context of clauses seeking to exclude rights of appeal against decisions of arbitrators, or attempts to challenge determinations of experts in cases of fraud, bias or mistake, than the context of the present case.  Moreover Mr Townend has drawn my attention to the decision of HHJ Gilliland, QC (sitting as a High Court Judge) in Nordot v Siemens (14 April 2000, unrep.) in which, in the context of an application to enforce an adjudication award, where the question was whether it was open to the parties to agree to confer jurisdiction on the adjudicator, he made these observations of general principle:

“It seems to me that the submission that it is not open to the parties to confer jurisdiction on an adjudicator is not sound in principle, I can see no reason as a matter of law, why parties cannot agree to abide by the decision of a third party if they so wish. Clearly that is appropriate in the case of arbitration. Why should it not be appropriate in the case of adjudication I ask? If parties with their eyes open enter into an agreement to the effect that "The adjudicator will decide this question and we will be bound by his decision", why should the court not give effect to that agreement? There can be no public policy against that and the mere fact that the system of adjudication is established by statute does not, it seems to me, make any difference. One could say exactly the same thing, as a matter of principle, in relation to the question of arbitration, There is no obligation to agree to arbitration before the parties agree to it. Similarly if parties wish to resolve a dispute and submit it to an adjudicator who derives his jurisdiction from the statute nevertheless, it seems to me, it is open to the parties to confer that jurisdiction on him by agreement should they wish”.  [pages 6- 7]

18.	I respectfully agree with what was said by HHJ Gilliland, QC in the Nordot case.  I am also satisfied however that it is important that clear words should be used before parties effectively exclude the unrestricted right which they otherwise would have to require a court to adjudicate all disputes which may arise between them.  Nonetheless I also accept that the court should not adopt an unreasonably exacting approach because, as Mr Townend rightly submitted, there are many examples in the construction sector of parties to construction contracts deciding to submit some or all disputes between them to binding determination by arbitration, adjudication or expert determination, so that there is nothing intrinsically unusual in parties seeking to achieve this result.

19.	So far as any actual or apparent conflict between Gorvins’ letter of 30 September 2013 and Blackstone’s letter of 24 October 2013 is concerned, Chitty [§2-032] says this:

“A communication may fail to take effect as an acceptance because it attempts to vary the terms of the offer. …  Nor, generally, can an offer be accepted by a reply which varies one of its other terms (e.g. that specifying the time of performance), or by a reply which introduces an entirely new term.  Such a reply is not an acceptance; but it may, on the contrary, be a counter-offer,http://login.westlaw.co.uk/maf/wluk/app/document?src=doc&linktype=ref&context=13&crumb-action=replace&docguid=I2B4ADC10EED311DEB67EC32B1508840A - c_2-032.fn164#c_2-032.fn164 which the original offeror can then accept or reject. On the other hand, statements which are not intended to vary the terms of the offer, or to add new terms, do not vitiate the acceptance, even where they do not precisely match the words of the offer. … The test in each case is whether the offeror reasonably regarded the purported acceptance “as introducing a new term into the bargain and not as a clear acceptance of the offer.”

The relevant background knowledge

20.	The parties were agreed that the relevant background knowledge included the terms of the construction contract and the terms of the Scheme.

The dispute resolution terms of the construction contract

21.	So far as the construction contract is concerned the parties were agreed, rightly in my judgment, that the dispute resolution terms contained in it were unclear and uncertain in their meaning and effect, and legally unenforceable as “agreements to agree”.  Thus:

(a)	Although not entirely clear, it would appear that the “independent quantity surveyor” clause was intended only to apply to disputes about how much was owed to the defendant in the event of termination by either party for cause, and that the “third opinion” clause was intended to apply only to post-completion disputes about the standard of work.  There was no dispute resolution clause of more general application.   

(b)	There was no provision for the appointment of an independent quantity surveyor in the event of disagreement as to an acceptable person.

(c)	The provision that both parties “should agree in writing to abide by his figure” appeared to amount to an agreement to agree, rather than a legally enforceable obligation.

22.	Nonetheless, I consider that Mr Townend was right to submit that the construction contract is of some - albeit in my view modest - relevance, insofar as it showed that the parties were willing to contemplate in the construction contract that a dispute about the valuation of the defendant’s works would be finally resolved by expert determination as opposed to the court.

The Scheme

23.	The parties were agreed that the terms of the Scheme were of particular significance in this case.  Although it is common ground that the right of adjudication under the Scheme did not apply to the construction contract in this case,  because the right of adjudication under the Scheme conferred by s.108(3) Housing Grants, Construction and Regeneration Act 1996 does not apply to constructions contracts with residential occupiers for operations on a dwelling house: see s.106, nonetheless Gorvins were expressly proposing, and Blackstone was expressly agreeing to, an appointment of a quantity surveyor under the Scheme, so that its terms are of obvious relevance in that way.

24.	The Scheme, as is well known to those to those involved in dispute resolution in the construction sector, contains detailed provisions for the appointment of an adjudicator, the procedure applicable to the adjudication, and for the adjudicator’s decision.  As relevant to this case:

(1)	§20 requires the adjudicator to “decide the matters in dispute”.

(2)	§23(2) provides that the adjudicator’s decision “shall be binding on the parties, and they shall comply with it until the dispute is finally resolved by legal proceedings, by arbitration or by agreement between the parties”.  
	(These words are to materially the same effect as s.108(3) of the 1996 Act.) 

25.	As regards point (1), it is well known to those to those involved in dispute resolution in the construction sector that an adjudicator does not, unless the contract provides or the parties agree to the contrary, have jurisdiction to decide more than the dispute which was referred to him, or more than one dispute.  Ascertaining what dispute was referred to him involves an examination of the notice of intention to refer in the context of the previous exchanges between the parties.  The adjudicator does have jurisdiction to determine all defences available to the responding party and raised by him in the adjudication, even though not expressly referred to in the notice of intention to refer or in the previous exchanges: see the analysis of Coulson J. in Pilon v Breyer Group [2010] EWHC 837 (TCC).      

26.	As regards point (2), it is well known to those involved in dispute resolution in the construction sector that the adjudicator’s decision has a temporarily binding quality.  What that means is that it is binding on the parties, in the sense that they must comply with it, and the court will enforce it, regardless of any complaints about its correctness or other matters which the losing party may wish to raise, unless and until the dispute is finally resolved, which may be by legal proceedings, arbitration (where applicable) or agreement.  As it was put by Ramsey J in Verry v Camden LBC [2006] EWHC 761 (TCC): 

“23.	An adjudicator's decision is the outcome of an adjudication which, in the case of construction contracts, is imposed by statue in the form of section 108 of the Housing Grants Act.  Whilst the means by which Parliament decided to impose the obligations is by implying contractual terms, the contractual terms must be construed in the light of that statute and the statutory intention.  The statutory intention was set out in what has now become a classic statement on this aspect by Mr. Justice Dyson in Macob Civil Engineering Limited -v- Morrison Construction Limited [1999] B.L.R. 93, para. 24:

	"The intention of Parliament in enacting the Act was plain.  It was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis, and requiring the decision of adjudicators to be enforced pending the final determinaion of disputes by adjudication, litigation or agreement."

24.	That statement has formed the basis on which the Court of Appeal has proceeded in Bouygues -v- Dahl-Jensen [2000] B.L.R. 522 and Ferson Contractors -v- Levolux AT Limited [2003] B.L.R. 118.  The reference by Mr. Justice Dyson to the intention of Parliament being to require the decisions of adjudicators to be enforced pending the final determination of disputes, must be understood as a reference to the word "binding" in section 108(3) of the Act.  That word is used in a number of different contexts.  For instance, in section 58(1) of the Arbitration Act 1996 it is provided that an award by the tribunal pursuant to an arbitration agreement is final and binding.  

Whilst adjudication is not arbitration, in my judgment, the phrase "the decision of the adjudicator is binding" is intended to provide a similar degree of compliance by the parties, except that in the case of an adjudicator's decision, the decision is not “final” but is “interim” unless the parties agree to accept it as finally determining the dispute. The intention of Parliament must be that the decision is binding and enforced an interim stage.  If the decision were no more than another contractual obligation, which could be breached or could be reduced or diminished by other contractual obligations, then the fundamental purpose of providing cash flow in the construction industry would be undermined.  As Lord Justice Mantell said in Ferson -v- Levolux at para. 30, "the contract must be construed so as to the give effect to the intention of Parliament, rather than to defeat it."  In my judgment, that can only be done by giving proper effect to the word "binding" by enforcing the decision of adjudicators.

25.	Where there are potentially competing disputed rights and obligations those disputes must give way to the enforcement of the decision of  an adjudicator, otherwise it is evident that such claimed rights and obligations would defeat the binding nature of the adjudicator's decision and the intention of Parliament that such adjudicator's decisions should be complied with in the interim.”

The defendant’s arguments

27.	Mr Townend’s starting point was that the ordinary meaning of “binding” is permanent, conclusive, final and enforceable and that in the absence of express temporal qualification it means decided for all time.  He submitted that the wording of s.108(3) of the 1996 Act and §22 of the Scheme recognise this, by using words to the effect that the decision is binding until the dispute is finally determined or resolved by legal proceedings, arbitration or agreement.  Without such explicit temporal qualification, he submitted, binding means finally binding. 

28.	He submitted that the vital context here is that since an adjudication decision under the Scheme does not prevent a court from adjudicating on the same subject matter in subsequent legal proceedings, it would follow that proposing an adjudication under the Scheme would produce only a temporarily binding decision and that the parties, legally represented by experienced solicitors as they were, must be taken to have been aware of this.  He submitted that in such circumstances the only sensible meaning of the word “binding” to the reasonable observer was that Gorvins were proposing that the decision of the adjudicator to be appointed, if their proposal was accepted, would be permanently binding, as opposed to temporarily binding.  Otherwise, he submitted, there would have been no point in adding this qualification to the proposal.   

29.	He submitted that this was also consistent with the context that the construction contract contained a dispute resolution provision which was also clearly intended to produce a permanently binding decision, and that Blackstone had begun this whole process by suggesting that the defendant should employ this provision.

30.	He submitted that Blackstone’s letter of 24 October 2013 operated, on an objective analysis, as a simple acceptance of Gorvins’ proposal, and that it is irrelevant that the words used are slightly different.  In particular, he submitted, the fact that the letter used the word “and” instead of “save that” cannot, on any fair reading, be taken as conveying a counter-proposal that any decision should, in accordance with the Scheme, only be of temporarily binding effect.  He submitted that no reasonable observer could attribute such significance to such a minor difference in the words used.  Alternatively, he submitted that even if Blackstone’s letter did, on analysis, amount to a counter-offer, nonetheless it was plainly accepted by Gorvins’ letter of 5 November 2013, and the use of the word “binding” is to be construed as permanently binding for the same reasons as above.   

The claimants’ arguments

31.	Ms Ranales-Cotos’ starting point was that in this context the use of the word “binding” means no more than legally binding, and is to be distinguished from the use of the phrase “final and binding”.

32.	She submitted that the dispute resolution provisions in the construction contract were irrelevant, given their unclear drafting and effect, and given that the parties were clearly intending to override them in any event.

33.	She submitted that if Gorvins had intended to convey that the decision would be finally binding, unlike a Scheme adjudication, their letter would have said so in express terms.  She submitted that other, equally plausible, reasons why Gorvins might have been thought by the reasonable observer to have used the words “save that the decision … shall be binding on the parties” were either: (a) to confirm that the decision should have the same temporarily binding effect as an adjudication brought as of right under the 1996 Act and the Scheme (instead of one brought by agreement of the parties where the Act and the Scheme did not apply because the claimants were residential occupiers); or (b) to make clear, in contrast to what the position might have been under the dispute resolution provisions of the construction contract, that the decision was only intended to have temporarily binding effect.  

34.	She submitted that Blackstone’s letter of 24 October 2013 did amount to a counter-offer, and that the use of the word “and” made it clear that it was proposing that the offer, if accepted, would result in the adjudicator’s decision being only temporarily binding. 

My conclusions

35.	In my judgment the ordinary meaning of the word “binding” is not capable in itself of providing the answer to the question whether or not it means that the adjudicator’s decision is finally binding, in the sense that it prevents a court from adjudicating on the same subject matter in subsequent legal proceedings.  In my judgment this is a case where the answer can only come from the context in which the word was used.

36.	I am satisfied that Mr Townend is correct in his submission that the key context here is that 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, I am satisfied, 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. 

37.	Whilst paying tribute to their ingenuity, I do not accept either of Ms Ranales-Cotos’ alternative explanations as to why it might have been thought that Gorvins used the phrase “save that the decision … shall be binding on the parties”.  As to the first, since no-one had made any mention of the claimants’ status as residential occupiers, and since Gorvins were plainly proposing an ad hoc consensual, as opposed to a statutory as-of-right adjudication, there would have been no conceivable reason for using that phrase if that had been the intention.  As to the second, since no-one had made any mention of the status of the dispute resolution procedure under the construction contract, and since – as Ms Ranales-Cotos submitted – what was being proposed overrode it anyway, there would have been no conceivable reason for using that phrase if that had been the intention.  Moreover, if Gorvins were keen for some unstated reason to ensure that the decision would have only temporarily rather than permanently binding effect, they would have had no reason to add this phrase at all, since the incorporation of the Scheme would have that effect of itself.

38.	In short, it seems to me that the reasonable observer would have been in no doubt but that the only sensible reason for Gorvins including those words in their letter was to make clear that, in contrast to the position under a Scheme adjudication, if their proposal was accepted the adjudicator’s decision would be permanently, as opposed to temporarily, binding.  I am satisfied that it was being made plain that the proposal if accepted necessarily involved that the losing party to such an adjudication could not subsequently elect to re-run the whole dispute afresh in legal proceedings. 

39.	In those circumstances I am also satisfied that there can be no criticism that the effect of the agreement as put forward by Gorvins was not made sufficiently clear to Blackstone.  In my view it was clear to any reasonable informed reader, particularly the parties in this case, legally represented as they were. 

40.	What then about Blackstone’s response?  If one was to subject Blackstone’s letter of 24 October 2013 to detailed textual analysis, one might find some infelicities of wording.  Thus it did not make it clear whether or not it was intended to operate as an acceptance or as a counter-proposal. It referred at point 1 to the “appointment” being made in accordance with the Scheme “and that the decision of the QS shall be binding on the parties”, and separately at point 2 to the appointment being made by the President of the RICS.  It could be argued that points 1 and 2 arguably conflicted, in that appointment only by the President of the RICS conflicts with point 1, where the Scheme allows appointment by any adjudicator nominating body, and it could also be argued that there is no reference either to the procedure being in accordance with the Scheme, let alone the decision.

41.	However, it does not seem to me that anyone could argue that any of these points derogate from the fact that both letters make it perfectly plain, on any sensible purposive reading, what is being proposed, namely that the appointment should be by the President of the RICS as an adjudicator nominating body (which of course it is) and that the Scheme procedure, which includes the procedure (in the widest sense) contained in the Scheme as regards the production and effect of the decision, should apply, save for the one express qualification proposed by Gorvin and adopted by Blackstone.  No reasonable reader could have thought that Blackstone was putting forward some revision to the terms proposed by Gorvins.  No reasonable reader would have understood the (unexplained) use of the linking word “and”, instead of the words “save that”, as a clear indication that a counter-proposal for a temporarily, as opposed to permanently, binding decision was being put forward.  

42.	In the circumstances I am satisfied that this is a case where, on an objective reading, the offer was accepted by the response, albeit that slightly different words were used, so that it did not take effect as a counter-offer.    

43.	It follows, I am satisfied, that applying ordinary common law construction principles the agreement was for adjudication under the Scheme, save that the decision was to have permanently binding effect, so as to preclude a court from undertaking a fresh resolution of the same dispute.

The impact of the UTCCR on issue (a)

44.	It is common ground that the UTCCR apply in this case, because the claimants fall within the definition of a “consumer” and the defendant falls within the definition of “sellers or suppliers”.

45.	There are two respects in which the claimants seek to rely on the UTCCR, namely: (i) by arguing under reg. 5 that the term is unfair; (ii) by arguing under reg. 7 that the term is not expressed in plain, intelligible language.

46.	As material, reg. 5 provides that:

“(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. 
(2) 	A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term. 
(3) 	... 
(4) 	It shall be for any seller or supplier who claims that a term was individually negotiated to show that it was. 
(5) 	Schedule 2 to these Regulations contains an indicative and non-exhaustive list of the terms which may be regarded as unfair.” 

47.	Reg. 6(1) provides as relevant that:

“The unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.” 

48.	Within the indicative and non-exhaustive list of unfair terms in schedule 2 is a term which as relevant has the object or effect of:

“(q)	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 [or] unduly restricting the evidence available to him.”

49.	Reg. 7 provides as relevant that:

“(1) 	A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language. 
(2) 	If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail.”

Fairness

50.	Ms Ranales-Cotos submits that:

(1)	This is not an individually negotiated term, because it was drafted in advance by Gorvins for the defendant and the claimants were not able to influence its substance (reg. 5(2)), and also because the defendant has failed to show that it was individually negotiated (reg. 5(4)). 

(2)	As to reg. 5(2), and the fact that the claimants were undoubtedly represented by solicitors at the time the term was agreed, she relies on the decision of the Court of Appeal in UK Housing Alliance Ltd v Francis [2010] EWCA Civ 117 where Longmore LJ, in a judgment with which the other members agreed, said this:

“19.	The fact that a consumer or his legal representative has had the opportunity of considering the terms of an agreement does not mean that any individual term has been individually negotiated.  The supplier must prove that the relevant term was individually negotiated.  The concept of ability to influence the substance of a term comes from regulation 5(2) which provides:-
	“A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.”
	This therefore imposes an absolute prohibition on a finding of individual negotiation if there has not been an ability to influence the substance of a term.  It does not follow from the existence of the ability to influence the substance of a term that the term has, in fact, been individually negotiated.  That is still a matter for the supplier to prove and, in my judgment, the landlord did not prove that in this case.
   
(3)	The term does create a significant imbalance in the parties’ rights and obligations, in circumstances where the claimants (as domestic homeowners) would not have been obliged to submit to adjudication under statute, and even if they had would not have been obliged to submit to finally binding adjudication excluding their right to have the dispute finally determined by the court.  It is also contrary to the requirement of good faith in that there was no full, clear, plain or open explanation as to the finally binding effect of the adjudicator’s decision.  It falls within the scope of paragraph (q) of Schedule 2, and was imposed by the defendant in the context of the claimants being under threat of statutory demand.

51.	Mr Townend submits that:

(1)	The term was individually negotiated between the parties’ respective solicitors.  It was a standalone term, not falling within a standard form contract or standard terms of business, which the claimants were perfectly free to accept or to reject.  

(2)	In any event the term is not unfair, does not create a significant imbalance, in that it is even-handed as between the parties, and is a natural extension of what had already been agreed under the original contract in terms of dispute resolution.

52.	In my judgment the defendant has demonstrated that the term was individually negotiated.  So far as I am aware there is no authoritative guidance as to what is meant by “drafted in advance” (see Chitty on Contracts, 31st ed. §15-052).  I can see that any written proposal could be said to have been drafted in advance.  However in my view, adopting a purposive construction, if a party presents a term in a letter as an offer for consideration and possible acceptance by the other, where there is no evidence or basis for considering that it had been drafted prior to the production of the letter in question, that requirement is not satisfied.  Even however if I was wrong about that, I am satisfied that the claimants were clearly able to influence its substance.  Whilst it is clear from the UK Housing Alliance case that the fact of legal representation does not provide a complete answer to the question, in this case it is plain that the claimants had the opportunity to influence the substance of the term, and took it by instructing their solicitors to write a letter setting out the basis on which they were willing to accept the offer.  It follows in my judgment that the question of unfairness does not arise in this case. 

53.	If, however, I am wrong about that, I am also satisfied that the term is not unfair.  In short, I am satisfied that there is no significant imbalance to the claimants’ detriment contrary to the requirement of good faith, for the following reasons:

(1)	Although for the purposes of the UTCCR the claimants are within the definition of consumers and the defendant of suppliers, I am quite satisfied that in terms of economic and legal substance there was no imbalance between the parties, in circumstances where the claimants were professional persons (dentists) owning a substantial property, and where the defendant was effectively a modest one man building company.  Both had access to legal representation, and were able to assert their own interests equally well.

(2)	The parties were already in dispute.  Both parties, being legally advised, may be taken to have known full well that the defendant was not able to insist on adjudication under the Scheme, and that the existing dispute resolution clause in the existing contract was not legally enforceable (indeed Mr Connell, the defendant’s solicitor, says in his witness statement that he was fully aware of these points, and advised his client accordingly). The claimants may also be taken to know, and it is implicit in the correspondence, that they could not be forced to agree to adjudication along the lines suggested by the defendant.  There is no evidence or basis for believing that they felt in any way pressurised by the statutory demands into agreeing the proposal.

(3)	I am satisfied that the proposal was for joint benefit.  Whilst of course it is well known that adjudication has disadvantages compared to proceedings in court, specifically by reference to the truncated timetable and the absence of ability to recover legal costs, those very features also offer parties the considerable advantages of speedy determination and substantial overall cost saving.  The claimants were not being forced into agreeing a proposal which was manifestly to their disadvantage.  It was, I accept, even handed as between the parties.  It did not apply to each and every future claim which they might have wished to bring under the contract, only to the defendant’s extant claim for payment under the contract.    

(4)	I am also satisfied that the proposal was not presented other than in good faith.  It was presented as a standalone term, which was not concealed in a standard form document.  Although it did not use the word “finally” in front of the word “binding”, I am satisfied that this was the clear effect of the proposal.  Insofar as I need to make such a finding, I am satisfied that there is no evidence that the claimants or their solicitor believed that adjudication would not be finally binding, as is evident from the lack of protest when the defendant’s solicitors wrote at the time of the notice of adjudication to say that it would be finally binding.  Ms Ranales-Cotos submits that since the defendant’s solicitor says that he knew that the adjudicator’s decision would not be finally binding unless specifically agreed to the contrary, his failure to use the word “finally” amounted to a breach of the good faith obligation.  It is not clear whether or not she is submitting that this was a deliberate omission; if she is I am satisfied that there is no basis for the submission.  If not, given the conclusion I have reached in relation to the meaning of the term, and the conclusion I reach below as regards the reg. 7 argument, I do not consider that this argument assists the claimants’ case.  

(5)	Finally, although potentially falling within the scope of Schedule 2, I am satisfied that there is nothing intrinsically objectionable about the procedure proposed in the context of the case.  Whilst I have already noted that adjudication is a relatively rough and ready process compared to traditional court proceedings, adjudicators are experienced in deciding construction disputes, are required to act in accordance with the Scheme, to act fairly and to apply the law.  Whilst it is also true that challenges on the grounds of error of fact or law are not available, challenges on grounds of unfairness (bias or breach of natural justice) and lack of jurisdiction are permitted.  In any event, there is in my view a world of difference between the paradigm case of a large business restricting a small consumer’s right to have disputes determined by a convenient local court by way of pre-prepared standard conditions and the present case, in which the parties freely and equally negotiated a bespoke dispute resolution procedure which suited both of them at the time.

Plain and intelligible language

54.	Ms Ranales-Cotos submits, by reference to the discussion and authorities cited in Chitty at [§15-145], that the requirement that the term must be plain and intelligible means that its meaning must be clear, not only to a lawyer, but also to a typical or average consumer.  She submits that the failure to state in clear or any terms that the adjudicator’s decision will be finally binding, so as to exclude further redress in court, means that this requirement is not satisfied.  She also submits that in such circumstances the “presumption” in reg. 7(2) applies, and should resolve the matter in favour of the claimants.

55.	Mr Townend submits that the requirements of reg. 7(1) are satisfied here.  He submits that the court should be slow to hold that an individually negotiated term where, by definition, both parties have had the opportunity to ensure that its meaning is clear, is neither plain nor intelligible.  He submits, by reference to the arguments which I have accepted above, that read in context the words used were both plain and intelligible.  Finally he submits, by reference to the authorities cited in Chitty [§15-145], including the recent decision of HHJ Keyser, QC (sitting as a High Court Judge) in AJ Building and Plastering Ltd v Turner [2013] EWHC 484 (QB) at pars. 52 - 54, that reg. 7(2) cannot assist the claimants here, because: 
(a) 	reg. 7(2) only applies in circumstances where the common law “contra proferentum” rule would also apply, namely in cases of genuine interpretative doubt or ambiguity; 
(b) 	in deciding whether or not there is genuine interpretative doubt or ambiguity the usual common law principles of construction should be applied; 
(c)	thus it is only in cases where the application of those usual common law principles of construction produce genuine doubt or ambiguity as to which interpretation should apply that the court should adopt the interpretation most favourable to the consumer.

56.	I prefer and accept Mr Townend’s submissions.  I adopt, with gratitude, the clear and compelling analysis of HHJ Keyser, QC in AJ Building, and am quite satisfied, for the reasons I have already given, that since the application of normal rules of construction produce a clear answer there is no room for the “tie-breaker” approach required by reg. 7(2) to apply.  In any event, I am satisfied that in this case the requirement of plain and intelligible language was met, by reference to all of the factors referred to above.  In short, I do not think that any reasonable reader, even without the benefit of a legal background or familiarity with the statutory adjudication scheme, could reasonably have thought that “binding” meant anything other than finally binding so as to exclude the possibility of re-opening the same argument in subsequent court proceedings.      

Issue (2) – the extent of the final determination of the matters decided by the adjudicator  

The matters raised in the adjudication

57.	It is clear that the claim advanced by the defendant and pursued by way of statutory demands was, in substance, its final account claim, being the total of the unpaid balance of its final valuation and claim for release of retention.  It is also clear from Blackstone’s letter of 27 September 2013, to which I have already referred, that the claimants were challenging the valuation and making allegations of defective work and delay, so that there was nothing due to the defendant.  Issue was joined by the defendant in relation to the content of this letter in Gorvins’ detailed response of 6 January 2014.

58.	The dispute referred by the defendant to adjudication in August 2014 was the defendant’s entitlement to further payment under the contract.  It is clear from the claimants’ response that they were maintaining, and positively asserting, substantially the same matters as had been asserted in the letter of 27 September 2013 as a defence to the claim.  Thus in [§17] details of the claimants’ case in relation to the disputed items were set out, including reference to work which was not completed, work which was defective, and delays.  In [§24] the claimants denied that they were liable to the defendant for any sum, and in [§26] it was said that:

	“In the event that the adjudicator finds that sums are owing to [the defendant] (which is wholly denied) it is maintained that the costs of carrying out remedial works and costs caused by [the defendant’s] delay outweigh any sums due to it.” 

59.	It is clear, therefore, that the claimants were defending the claim on the basis of the true valuation, including an entitlement to deduct costs for incomplete and/or remedial works, and also on the basis of set off for damages for defective work and delay.  It is however also clear that they were not asserting a positive counterclaim as against the defendant in the adjudication.

60.	So far as the decision is concerned, it is clear from the reasons given by the adjudicator that:

(1)	He was fully aware that the issues he had to determine include the issues of valuation and final accounting and set-off.

(2)	He determined the valuation and final accounting issues, giving detailed reasons, and although he determined that a substantial sum was due to the defendant, he allowed certain abatements in certain amounts in relation to a number of the individual items of incomplete and/or defective work, as can be seen from his summary at [§55].

(3)	He determined the set off in relation to defective work and delay against the claimants, for reasons which he gave at [§60-67], which included the claimants’ failure to provide proof of their alleged losses.

The matters raised in the instant claim

61.	The instant claim as advanced by the claimants includes a claim for the determination of the final account as between the parties [§10], including an assertion that when proper allowance is made for payments already made and for incomplete and/or defective work [§11 and Annex 5] there is an amount due to the claimants of £43,944.05.  It also includes a claim for damages for delay, particularised at £48,000 plus interest [§13.1] and, although the basis is unexplained, a claim for recovery of the adjudicator’s fees [§13.2].  It is apparent that it is substantially the same the case that was advanced in the correspondence of 27 September 2013 and before the adjudicator, although it is now pleaded in the form of a positive claim in its own right rather than purely as a defence including a defence of set-off.

The arguments

62.	Although Ms Ranales-Cotos did not advance a specific case in her skeleton argument in relation to this issue, she did refer to and rely upon the arguments advanced in the skeleton argument lodged at the enforcement hearing before HHJ Raynor QC by her predecessor, Ms Sarah Lawrenson, which included an assertion [§21] that the dispute referred to and decided by the adjudicator determined only the defendant’s final account, and did not determine matters of set-off and counterclaim.     

63.	In his skeleton argument Mr Townend addressed this point, and submitted that the claimants had been afforded the opportunity, which they took, to advance allegations of incomplete and defective work and of delay, and are not entitled now to advance those matters again by way of court proceedings.

64.	In oral submissions he made it clear that it was his position that this extended not only to defences directed to the final account, but also to all defences raised by way of set-off.  He submitted that even though the claimants had, as he rightly accepted, not advanced a counterclaim before the adjudicator, nonetheless the substance of the matters now sought to be raised as a positive claim had also been raised before the adjudicator, albeit only by way of defence of abatement and/or set-off, so that the claimants are bound by his determination that they had not proved their case in relation to any of these items.  He submitted that the doctrine of res judicata applied as much to matters determined against the claimants in the adjudication as to matters determined in legal proceedings.   

65.	He submitted that the only circumstances in which the claimants could now advance a claim in legal proceedings would be either:

(a)	a claim arising out of a latent defect in the works which had since come to light; or

(b)	a claim not previously raised at all before the adjudicator, whether by way of pure defence or set off or otherwise.

66.	He also accepted that 	if the adjudicator had found in the claimants’ favour on the set-offs, and determined that they wholly extinguished the claim, but had not – because he had no jurisdiction to do so – made any decision as against the defendant in relation to the balance, it would have been open to the claimants to make a claim for the difference between the total claim and the amount set off, but that given his findings this cannot assist the claimants here.

67.	In oral submissions in response Ms Ranales-Cotos submitted that there was no basis for preventing the claimants from asserting by way of legal proceedings matters which they had not raised as a counterclaim before the adjudicator.

My conclusions

68.	I am satisfied that it is not open to the claimants to seek to have the final account re-determined by legal proceedings, and that this would include seeking to re-open the final account by raising matters raised before the adjudicator by way of defence of abatement and/or set-off.

69.	The more difficult question is whether I am also satisfied that the claimants can nonetheless advance positive claims in this case which are in substance, I am satisfied, the matters which were previously advanced by them in the adjudication as matters of set off, but not as matters of counterclaim.

70.	I accept that the adjudicator did not have jurisdiction to, and did not, determine any matters which might have been, but were not, raised by way of set-off or counterclaim.  Insofar as advanced by Mr Townend, I have not been satisfied that the doctrine of abuse of process could apply here, so as to enable the court to conclude that the claimants should not be permitted to advance claims which could have been, but were not, advanced in the adjudication.  The obvious difficulty with that argument is that it was not open to the claimants, unless the defendant consented, to raise such matters by way of counterclaim in the adjudication, and it would be difficult in my judgment to say that the claimants should be debarred because they failed to ask the defendant for its agreement to do so.

71.	However I do accept Mr Townend’s submission that the claimants, having chosen to advance these matters by way of set-off, are now bound by the adjudicator’s adverse determination in relation to those matters.  To advance the same matters by way of independent claim would be to seek to re-litigate matters which have already been finally determined against them in the adjudication.  Although Ms Ranales-Cotos protested that this was unfair in circumstances where one of the reasons the adjudicator found against her clients was the failure to provide supporting evidence, the answer to that complaint is that it was her clients’ decision to seek to raise these matters by way of defence of set-off.  If they had not done so they would not find themselves in this position.  If as a result they have lost the opportunity to advance claims which they might otherwise have been able to establish, that is the consequence of their own decisions.

72.	It follows, I am satisfied, that all of the claims now sought to be advanced by the claimants in these proceedings cannot succeed, because they are already the subject of final determination by the adjudicator.  Whether that conclusion is properly to be characterised as a successful jurisdictional challenge, or as a successful application for summary judgment, or both, appears immaterial.

73.	It follows in my judgment that the claim should be set aside and the proceedings stayed on the basis of the jurisdictional challenge, but would in any event have been dismissed on the basis of the summary judgment application.

Two subsidiary matters

74.	I should briefly record what I would have decided had my conclusion been different.

75.	If I had not dismissed the whole claim, I would in any event have given summary judgment against the claimants in relation to the claim for repayment of the adjudicator’s fees (even assuming they have been paid) on the basis that no conceivable basis has been articulated or could be suggested for seeking their repayment in these proceedings.  The adjudicator determined, as he was entitled to do, who should pay his fees, and even if the claimants were entitled to re-litigate the matters determined by him, and succeeded, there is no authority or basis for suggesting, that they could also recover the fees which he had ordered them to pay.  That would be to confuse the right to have the matters determined by the adjudicator finally determined in legal proceedings with an appeal.     

76.	Finally, as a fallback, Mr Townend had submitted that if I had allowed the claim to proceed it should have been stayed in accordance with the dispute resolution procedure in the construction contract or in the ad hoc adjudication agreement.  I would not have accepted that argument, because:

(1)	As the defendant’s solicitors had always frankly and correctly conceded, the dispute resolution procedure in the construction contract was unworkable, even if not legally unenforceable.

(2)	The ad hoc adjudication agreement was only ever intended to apply to the dispute then in play, namely the defendant’s final account claim. It was never intended to be an exclusive dispute resolution procedure for all disputes arising under the construction contract.  In any event, if it was not finally binding, there would be no point in insisting that the claimants proceed to an adjudication under the Scheme when they could always pursue court proceedings if dissatisfied with the outcome.