- with readers working within the Property, Transport and Construction & Engineering industries
The Technology and Construction Court in Paragon Group Limited v FK Facades Limited ruled an assignee is entitled to adjudicate under a construction contract. The decision is the first direct authority on the point, and the outcome is likely to be a welcome development for employers but unwelcome for contractors.
The facts
A contract was entered into by Office Depot International (UK) Limited (the "Employer") and FK Facades Ltd (the "Contractor") to remediate a roof installation as part of a settlement agreement. The contract was a JCT Minor Works Building Contract, 2016 Edition, to which the Scheme for Construction Contracts 1998 (the "Scheme") applied. The Scheme incorporates adjudication provisions into a construction contract when there are none.
The contract was assigned twice. The Employer assigned to another party who then subsequently assigned to Paragon Group Ltd (the "Assignee"). The validity of the assignments was not in dispute.
The project faced delay and a dispute arose because the Assignee alleged the Contractor was responsible. As a result of the delay, the Assignee terminated the contract and applied liquidated damages to the Contractor. The Contractor disputed this, and the Assignee referred the dispute to adjudication. The Contractor refused to comply with the adjudicator's decision which required it to pay £80,500 plus the adjudicator's fees.
The Contractor challenged the adjudicator's jurisdiction, arguing that only the original party to the contract can refer disputes to adjudication. The adjudicator rejected this argument, and the Assignee applied to the Technology and Construction Court for a summary judgment to enforce the decision.
The decision
The court noted that there was no direct authority on whether or not it is permissible for an assignee to refer a dispute to adjudication under a construction contract. The court's analysis focused on whether an assignee has "all of [the Employer's] rights, title, interest and benefit in and to" a contract. If the Assignee had the same rights under the contract as the original employer, the adjudication would be enforceable.
The Defendant argued that as the Scheme allows any Party, defined as "either the Employer or the Contractor", to adjudicate then only the original parties can refer a dispute to adjudication. The court was unsympathetic to this argument, noting the definition had to be read in light of the provision that permitted the Employer to assign the contract. The court was satisfied that the phrase "or any legal assignee of such party" could essentially be inserted after every reference to a Party "without doing violence to the wording of the Scheme".
Additionally, the court considered the definition of legal assignment in both statute and case law. The court affirmed an assignee benefits from "all legal and other remedies" under a contract "as though it had been his from the beginning". This confirms that assignees benefit from all rights and remedies under a contract that are associated with what has been assigned in the absence of any express wording to the contrary.
The court noted that it would present practical difficulties if an assignee had to persuade the assignor to pursue the claim on its behalf in order to adjudicate. As the original contracting parties consented to assignation, the court deemed it unreasonable that they intended to prevent any assignee from adjudicating under the contract.
Key takeaways
The outcome of this case highlights that:
- Assignees can benefit from the right to adjudicate under construction contracts
- If parties intend to prevent an assignee from possessing adjudication rights, express wording should be included to this effect
- Contractors should consider whether their consent ought to be required for assignations by Employers
This article was co-authored by Trainee Ruaridh Brown.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
