Clash of the Titans


Author: Gillian Birkby


Legislation does not always fit together very well, as we know. For instance, there are frequent clashes between English Heritage exercising its statutory powers, requiring buildings to be preserved as originally constructed, and the desire of designers, contractors and employers to satisfy the CDM regulations by installing protective netting inside guttering, so that working at height in order to clear it out is not needed so frequently.

In a recent case, the court had to deal with another issue involving two pieces of legislation: the Act giving rights to third parties (the Contracts (Rights of Third Parties) Act) and the Construction Act. The issue was whether an affiliate of the employer, which had been given express rights under a contract, could enforce them by way of adjudication.

The case concerned an M&E designer, HPF, which was engaged to carry out design in relation to the construction of a new data hall at a data centre for Barclays PLC. Clause 14.3 in the appointment was in fairly standard wording:

“Any Affiliate with a direct interest in the Project shall be entitled to enforce the terms of this Agreement as ‘Client’ always provided that the Consulting Engineer shall be entitled to rely on the equivalent defences in respect of such liability which it has against the Client.”

An affiliate, Barclays Bank PLC, commenced adjudication proceedings against HPF in relation to alleged defects in the chilled water system, so HPF went to court in rather a hurry, during the adjudication period, asking for a declaration that Barclays Bank PLC was not entitled to bring adjudication proceedings against it.

One of the questions for the court was whether the terms of clause 14.3, quoted above, gave the affiliate an entitlement to bring adjudication proceedings. The appointment contained fairly standard adjudication provisions, stating that any adjudication was to be decided under the terms of the statutory Scheme and that: “The decision of the adjudicator shall be binding on the parties unless and until the dispute is determined by legal proceedings or by agreement” (clause 27.3).

The courts have in the past been critical of attempts to bring allegations of professional negligence by way of adjudication, but that point was not raised here. The question, rather, was whether the words in clause 14.3: “entitled to enforce the terms of this agreement as ‘Client'”; included adjudication proceedings. Did the reference to ‘binding on the parties’ in clause 27.3 include the affiliate as a ‘party’ for the purpose of that clause?

The judge resolved this by making a distinction between clauses in the appointment relating to liability, e.g. the obligation to perform to a certain standard, and those of a more procedural nature such as suspension or termination. He classified the right to bring adjudication proceedings as a procedural right, and relied heavily on the wording of clause 14.3 (quoted above) which referred to “equivalent defences in respect of such liability“. In his judgement, enforcing the terms of the agreement meant enforcing the terms relating to liability, and not the procedural terms.

To complete the picture, there was a further clause stating that "save as expressly provided in clause 14.3… nothing in this Agreement shall confer or purport to confer on any third party any benefit or right to enforce any terms of this Agreement". By restricting the rights of a third party to those stated expressly in clause 14.3, this meant that the affiliate could not enforce the procedural right to go to adjudication in order to resolve the dispute.

This case emphasises the importance of the exact wording of a contract. The English language can be remarkably slippery when it comes to stating exactly what you intend to say.

Gillian Birkby, Head of Construction, Fladgate LLP (gbirkby@fladgate.com)

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