Can an assignee adjudicate under the Construction Act?

The case arose following the assignment by Office Depot International (UK) Ltd (the Employer) of its rights, title and benefit in a JCT Minor Works Building Contract (2016 ed) with FK Facades Ltd (the Contractor) dated 17 October 2018 (the contract).

The contract allowed the Employer to assign or charge the benefit of the contract at any time without the Contractor’s consent.

In 2021, the Employer assigned the benefit of the contract to another party, which later assigned the benefit to Paragon Group Ltd (the Assignee) in 2024.

Both assignments were notified to the Contractor.

The matter came before HHJ Stephen Davies (sitting as a High Court judge) during summary enforcement proceedings that followed a successful adjudication by Paragon against the Contractor under the Housing Grants, Construction and Regeneration Act 1996 (Construction Act).

The key issue in dispute was whether Paragon had been entitled, as an assignee under the Contract, to adjudicate its claim against the Contractor.

Specific provision was made in the contract that: “If any dispute or difference arises under the Contract, either Party may refer it to adjudication in accordance with clause 7.2.” Clause 7.2 referred to adjudication under the Scheme for Construction Contracts (the Scheme).

HJJ Davies stated in his judgment that counsel had accepted that none of the authorities directly addressed the point at issue – they were at best of marginal assistance. Notwithstanding this, the court reviewed several authorities that might bear on the issue, together with Sir Peter Coulson’s comments in his textbook, Construction Adjudication. 

HJJ Davies, otherwise, focused on what he described as the general law of contract and assignment, which, in his opinion, included the following points:

…(a) in strict legal analysis, an assignee does not become a “party” to the contract in the full sense, because only someone who becomes a party through novation assumes the benefit and the burden of the contract and, thus, becomes a party to the contract for all purposes in replacement of the original party;

(b) nonetheless, in strict legal analysis a statutory assignment of the benefit of a thing in action under a contract passes the legal right to the thing and all legal rights and other remedies for the same, which are transferred to the assignee as if they had been theirs from the beginning, and which would thus in my judgment – absent express provision to the contrary – include the right to adjudicate;

(c) one might expect a permitted assignee to have all of the rights and remedies passing at law with the rights assigned, unless or to the extent that such rights were excluded, expressly or by necessary implication.

With regards to the “practical consequences” that counsel for the Contractor had sought to highlight as being supportive of its position, HJJ Davies concluded that whilst he had found the issue in dispute to be finely balanced, he was satisfied that on an objective interpretation of the Contract an assignee can adjudicate an assigned claim against an original other party and that the adjudicator had jurisdiction to decide the dispute that had been referred to him by Paragon.

Further, HJJ Davies stated: “The contract and the Scheme can be read as if the words ‘or any legal assignee of such party, where applicable’ are read into the definition of a party, in much the same way as they can be and are read into the definition of a contracting party where it is afforded remedies under a standard commercial contract where assignment is permitted…”

Finally, concerning the two further points raised by counsel for the Contractor, he found neither to have merit and thus concluded that Paragon was entitled to summary judgment as claimed.

The Contractor was granted permission to appeal by HJJ Davies. However, pending any appeal, the decision should be borne in mind when drafting the assignment clause in any contract to which the Construction Act may apply. Further still, developers and funders may wish to consider the extent to which unexpected consequences of an assignment clause may impact their position.

In addition, pending appeal, some may consider the enforcement of adjudication arising from similar circumstances to be uncertain.

Finally, perhaps HJJ Davies’ comments will be considered by some to be a timely reminder of the general principles of novation and assignment and the clear difference between the two, which is sometimes not fully understood by those involved.

Rob Wilson is a partner, and Avita Rajoo is an associate at Trowers & Hamlins.