Hurley Palmer Flatt Ltd v Barclays Bank plc (TCC - 23.9.2014)
The clients affiliate company did not have any freestanding right derived from clause 14.3 of the engineers appointment or any right derived from clause 14.3 and section 1(4) of the Contracts (Rights of Third Parties) Act 1999 to refer disputes to adjudication
23 September, 2014
HURLEY PALMER FLATT LTD v BARCLAYS BANK PLC
Technology and Construction Court
23rd September 2014
Clause 14.3 of the engineer’s appointment by the client, which included an adjudication clause, stated that any affiliate of the client was entitled to enforce its terms as "client" provided that the engineer was entitled to rely on the equivalent defences in respect of any liability it had against the client. Section 1(4) of the Contracts (Rights of Third Parties) Act 1999 provides that it does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract.
The client’s affiliate company referred a claim against the engineer to adjudication. Ramsey J declined to make the declaration sought by the engineer that the affiliate was not entitled to commence an adjudication.
The affiliate did not have a freestanding right derived from clause 14.3 because the reference to "such liability" in the wording of the proviso to clause 14.3 strongly indicated the intention that the rights to be enforced by the client’s affiliate were those rights giving rise to the engineer’s liability to the client and not procedural rights such as the right to adjudicate under the contractual adjudication clause.
In addition the affiliate did not have any right derived from clause 14.3 and section 1(4) to refer disputes to adjudication. The rights which the affiliate sought to enforce did not engage the conditions within section 1(4) in respect of the rights under clause 14.3 or impose any limitation on the way in which the rights under that clause could be enforced. Adjudication, unlike arbitration, is not a mandatory alternative way in which a party to a contract has to enforce its rights, is a voluntary method of dispute resolution in the sense that one party to a contract may but is not obliged to have a dispute temporarily resolved, pending a final determination by the courts or, if applicable, arbitration and therefore differs in nature from the terms of an arbitration clause under which a party's rights can only be determined by arbitration. A third party’s right to enforce a term of a contract is not required to be subject to or in accordance with adjudication under the adjudication clause.