Court confirms adjudication rights may survive in construction settlement agreements in London Eco Homes Ltd v Raise Now Ealing Ltd [2025] EWHC 1505 (TCC)[1]
It may come as a surprise to many that a settlement agreement arising from a construction contract can still be subject to adjudication even where the agreement contains no express terms allowing for adjudication as a form of alternative dispute resolution (ADR).
This position was confirmed in the recent case of London Eco Homes Ltd v Raise Now Ealing Ltd [2025] EWHC 1505 (TCC), in which the settlement agreement was held to be a variation of the original contract. This meant the adjudication provisions contained in the contract (either express or implied by the Housing Grants, Construction and Regeneration Act 1996 (the Act)), provided the parties with a right to adjudicate. This decision reinforces the courts’ support for ADR, particularly adjudication, in construction disputes.
Background
In November 2021, Raise Now Ealing Limited (RNE), instructed London Eco Homes Limited (LEH) under a JCT Intermediate Building Contract with contractor's design (the Contract) to complete works at a project in West Ealing. The Contract contained an express right to refer a dispute to adjudication.
Several disputes arose and a negotiated settlement was reached between the parties accompanied by a schedule for payments (the Settlement Agreement). The Settlement Agreement contained no express provisions for adjudication. One payment under the Settlement Agreement was contingent on LEH providing a warranty for basement works (including all necessary works or modifications which might be required for sign-off of the warranty), or an acceptable insurance-backed guarantee, to support these works.
The dispute and adjudication
Neither the warranty nor an insurance-backed guarantee was provided by LEH. Consequently, RNE failed to make a payment in accordance with the Settlement Agreement, leading to LEH referring the dispute on non-payment to adjudication.
The responding party raised a jurisdictional challenge as to whether the adjudicator had authority to hear the dispute, on the basis that there was no express provision in the Settlement Agreement. This was rejected by the adjudicator who went on to decide that LEH was due a payment of £95,000. RNE refused to pay the awarded sum, leading to LEH commencing court proceedings to enforce the decision.
Enforcement and Part 7 proceedings
LEH’s position was that the Settlement Agreement was a variation of the Contract, or alternatively, the basement works meant it was a ‘construction contract’ under the Act, so the relevant provisions to refer a dispute to adjudication could be implied. RNE maintained its challenge on jurisdiction, arguing LEH could not rely upon the adjudicator’s decision because there was no right to adjudicate for the following reasons:
- both parties had agreed to enter into a free-standing agreement (with no adjudication provisions);
- the specific terms of the Settlement Agreement exclusively referred to “the courts of England and Wales”, and so should be interpreted as an exclusion of any right to adjudicate;
- the Contract was superseded and replaced by the Settlement Agreement and therefore cannot be said to have survived for the purposes of providing jurisdiction for adjudication; and
- the right to payment under the Settlement Agreement had not accrued as LEH had failed to provide the warranty or insurance-backed guarantee.
The decision
Where the defendant subsequently changed its position and accepted that the right to payment had accrued under the Settlement Agreement, the only issue left for the court was the jurisdictional challenge: whether an adjudication clause had been implied by statute or alternatively whether the adjudication clauses in the Contract survived? If either approach was true, then LEH’s claim would succeed.
Judge Baldwin first assessed whether the Settlement Agreement itself could be regarded as a construction contract to check if a statutory right had arisen. This is because the statutory right to adjudicate only arises as an implied term within ‘construction contracts’ (defined under section 104 of Act[2] as agreements for the carrying out of ‘construction operations’, as further defined by section 105).[3]
Whilst the Settlement Agreement did contain limited provisions for construction operations relating to the basement works, the judge held that because the dispute did not arise out of the provision of the "necessary works or modifications", but rather out of the timing and/or acceptability of the provision of the basement warranty, “the dispute referred was not sufficiently connected with or related to construction operations to allow for section 108 to be engaged.”[4] For this reason, there was no implied right to adjudicate pursuant to the Act.
However, when reviewing the original adjudication clauses of the Contract the judge focused on whether the dispute referred can properly be said to be a dispute "under" the contract. Here, the judge decided the Settlement Agreement was to be construed as a variation of the Contract and not a standalone agreement because:
- the Settlement Agreement referred directly to the Contract’s termination process;
- the parties had agreed the termination notices were served correctly "in accordance with the JCT Contract"; and
- the Settlement Agreement varied the original contractual mechanism for termination and provided for consideration.
The judge therefore decided the right to adjudicate had arisen and LEH was entitled to the summary judgment.
Key takeaways
This case clarifies that settlement agreements resolving construction disputes may be treated as variations of the original contract, but this will turn on the particular facts. If the original contract includes adjudication rights, either expressly or under the Act, those rights may carry through to the settlement agreement. Merely including different dispute resolution terms in a settlement agreement may not be enough to exclude adjudication if the agreement remains connected to the original contract. Where the status of the agreement is uncertain, parties wishing to preserve adjudication should consider including an express clause. However, parties should remember that they cannot agree to exclude adjudication from construction contracts (as defined under the Act) because the statutory right to refer a dispute to adjudication will prevail. In all cases, careful drafting is essential to ensure the dispute resolution mechanism reflects the parties’ intentions.