Settlement Agreements, variations, and adjudication: Lessons from London Eco Homes v Raise Now Ealing

Disputes are almost unavoidable in the construction industry, and settlement agreements often seem like the quickest way to resolve issues. However, a crucial question arises: if a settlement agreement does not include an adjudication clause, does this mean that the right to adjudicate future disputes is forfeited?

The case of London Eco Homes v Raise Now Ealing provides a clear and timely answer.

In November 2021, Raise Now Ealing appointed London Eco Homes under a JCT Intermediate Building Contract. As is standard, the contract included a clause allowing disputes to be resolved by adjudication.

When disputes later arose, the parties signed a settlement agreement on 8 August 2023 with a payment plan. However, when the Raise Now Ealing failed to honour its payment obligations, the matter was referred to adjudication.

Raise Now Ealing objected, arguing that the adjudicator had no jurisdiction since the settlement agreement did not itself contain an adjudication clause. The adjudicator rejected this argument and ruled in London Eco Homes’ favour, ordering Raise Now Ealing to pay.

Further refusal to pay was followed by enforcement proceedings before the Technology and Construction Court (TCC).

Issues before the court

The TCC was asked to decide whether the adjudicator had jurisdiction, given the absence of an explicit adjudication clause in the settlement agreement.

Raise Now Ealing’s arguments:

• The settlement agreement was a stand-alone contract without an adjudication clause, so the adjudicator had no authority.
• The settlement agreement contained clauses referring to English law and court jurisdiction which by implication excluded adjudication as a form of dispute resolution.

London Eco Homes’ arguments:

• The settlement agreement was tied to the original contract, which already contained adjudication clauses.
• The settlement agreement qualified as a construction contract under Section 104 of the Housing Grants, Construction and Regeneration Act 1996 (Housing Grants Act), which carries a statutory right to adjudication.

The Court’s ruling

1. Was the settlement agreement itself a construction contract?
   • The Court said no. Although Clause 2.7 of the settlement agreement mentioned potential modifications relating to a basement warranty, these did not amount to “construction operations.”
   • As such, no statutory right to adjudication applied.
2. Did the original contract’s adjudication clauses carry over?
   • Yes. The Court held that the settlement agreement amended the original contract, rather than replacing it.
   • This was because the settlement agreement expressly referred to the contract’s termination mechanisms.
   • The “Entire Agreement” clause applied to termination but did not override the existing dispute resolution provisions.
3. Did the governing law and jurisdiction clauses exclude adjudication?
   • No. Clauses stating that English law governs and that the courts have jurisdiction do not exclude other methods of dispute resolution, such as adjudication.

On this basis, the TCC concluded that the adjudicator did have jurisdiction and that the adjudicator’s decision was enforceable.

Commentary

This case highlights the enduring importance of adjudication in the construction industry, even when disputes appear to have been resolved through settlement. The TCC adopted a broad interpretation of adjudication clauses, echoing earlier precedents such as Murphy v Maher.

The decision supports adjudication as a cost-effective and efficient method for resolving disputes, benefiting both contractors and employers.

It also serves as a reminder to construction stakeholders: settlement agreements must be drafted with precision. If parties intend to exclude or alter the scope of existing adjudication provisions, this must be made absolutely clear. Otherwise, adjudication rights under the original contract may still apply.

For advice or more information on dispute resolution in the construction industry, please contact Msizi Zungu, Nikita Lalla, or Ricardo Pillay.