Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd

JurisdictionEngland & Wales
Judgment Date21 November 2003
Neutral Citation[2003] EWCA Civ 1750
Docket NumberA1/2003/0569
CourtCourt of Appeal (Civil Division)
Date21 November 2003
Pegram Shopfitters Ltd
Tally Weijl (UK) Ltd

[2003] EWCA Civ 1750


Lord Justice May

Lady Justice Hale

Mr Justice Hooper






Royal Courts of Justice


London, WC2

MR JEREMY HYAM (instructed by Maxwell Batley of London) appeared on behalf of the Appellant

MR ABDUL JINADU (instructed by Field Seymour Parkes of Reading, Berkshire) appeared on behalf of the Respondent


It is not just nostalgia to recall the long since discredited decision of this court in Dawnays v Minter [1971] 1 WLR 1205. Junior counsel now before the court will probably never have needed to look at it. But it and cases which followed were the talk of the town in some circles in the early 1970s. These were cases in which this court, notably in the judgment of Lord Denning MR, held that architects' certificates under standard forms of building contracts were virtually cash. Cash flow was the very life blood of the enterprise. Under contemporary standard forms of building contract and sub-contract, sums certified and paid to contractors as due to sub-contractors must be paid without deductions for cross-claims or contra-accounts, as they were referred to. Contractors and sub-contractors with the benefit of architects' certificates were enabled to obtain summary judgment for the amount certified without deduction. Dawnays v Minter was overruled in the House of Lords in Modern Engineering v Gilbert-Ash [1974] AC 689. Junior counsel now before the court will have had every cause to consider this case, because it is a leading decision on the law of set off. It was held that there was no such general principle as appeared to have been laid down in Dawnays case. On the true construction of the sub-contract before the House, there was no provision which ousted the right of common law set off or abatement. Lord Diplock famously observed at page 718 that "cash flow" is the life blood of the village grocer too, though he may not need so large a transfusion from his customers as the shipbuilder in Mondel v Steel (1841) 8 M&W 858 or the sub-contractor in the appeal before the House.


Construction contracts do by their nature generate disputes about payment. If there are delays, variations or other causes of additional expense, those who do the work often consider themselves entitled to additional payment. Those who have the work done often have reasons, good or bad, for saying that the additional payment is not due. Those who consider and make policy for the building industry, including the government, have taken a general view over the years that a temporary balance should in appropriate circumstances fall in favour of those who claim payment, at the temporary expense if necessary of those who pay. In the years that followed Modern Engineering v Gilbert-Ash, standard forms of building contract gradually developed a process of adjudication. If there were disputes as to payment, these could be referred for speedy interim determination to an adjudicator. The adjudicator's decision would be enforceable by summary judgment if necessary. If agreement did not follow for the dispute as a whole, it would be then determined by arbitration or litigation and the eventual final answer implemented.


In July 1993, the government appointed Sir Michael Latham to undertake a review of Procurement and Contractual Arrangements in the United Kingdom construction industry. One of the recommendations in his report was that legislation should provide for the speedy resolution of disputes, including disputes as to payment by adjudication, referee or expert. This recommendation resulted in Part II of the Housing Grants, Construction and Regeneration Act 1996. This provides that every written construction contract has to contain the right to refer disputes to adjudication under a procedure which complies with section 108. If the written construction contract itself contains provisions for such a right, those provisions will apply. If and to the extent that it does not, the adjudication provisions of the Scheme for Construction Contracts apply —see section 108(5). Section 114 provides for the minister to make a Scheme by regulations. Section 114(4) provides that where any provision of the Scheme apply by virtue of this part of the Act in default of contractual provisions agreed by the parties, they have effect as implied terms of the contract concerned.


Section 108(2) provides:

"The contract shall -

a) enable the party to give notice at any time of his intention to refer his dispute to adjudication;

b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice;

c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;

d) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;

e) impose a duty on the adjudicator to act impartially; and

f) enable the adjudicator to take the initiative in ascertaining the facts and the law."


Sub-section (3) provides:

"The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.

The parties may agree to accept the decision of the adjudicator as finally determining the dispute.".


The Secretary of State has made regulations under the powers conferred on him by sections including sections 108(6) and 114 of the 1996 Act by S.I. 1998 number 649, entitled The Scheme for Construction Contracts (England and Wales) Regulations 1998.


The provisions of Part II of the 1996 Act only apply to construction contracts which are in writing. Section 107 provides:

"(1) The provisions of this Part apply only where the construction contract is in writing, and any other agreement between the parties as to any matter is effective for the purposes of this Part only if in writing …..

(2) There is an agreement in writing —

(a) if the agreement is made in writing (whether or not it is signed by the parties),

(b) if the agreement is made by exchange of communications in writing, or

(c) if the agreement is evidenced in writing.

(3) Where the parties agree otherwise than in writing by reference to terms which are in writing, they make an agreement in writing.

(4) An agreement is evidenced in writing if an agreement made otherwise than in writing is recorded by one of the parties, or by a third party, with the authority of the parties to the agreement.

(5) An exchange of written submissions in adjudication proceedings, or in arbitral or legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party against another party and not denied by the other party in his response constitutes as between those parties an agreement in writing to the effect alleged."


The policy of the legislation is clear. It was described by Dyson J, as he then was, sitting in the Technology and Construction Court in Macob Civil Engineering Limited v Morrison Construction Limited (1999) 64 Con LR 1 at paragraph 14 in these terms:

"The intention of Parliament in enacting the Act was plain. It was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis, and requiring the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement: see s108(3) of the Act and paragraph 23(2) of Part 1 of the Scheme. The timetable for adjudications is very tight (see s108 of the Act). Many would say unreasonably tight, and likely to result in injustice. Parliament must be taken to have been aware of this. So far as procedure is concerned, the adjudicator is given a fairly free hand. It is true (but hardly surprising) that he is required to act impartially (section 108(2e) of the Act and para 12(a) of Part 1 of the Scheme). He is, however, permitted to take the initiative in ascertaining the facts and the law (section 108(2)(f) of the Act and para 13 of Part 1 of the Scheme). He may, therefore, conduct an entirely inquisitorial process, or he may, as in the present case, invite representation from the parties. It is clear that Parliament intended that the adjudication should be conducted in a manner which those familiar with the grinding detail of the traditional approach to the resolution of construction disputes apparently find difficult to accept. But Parliament has not abolished arbitration and litigation of construction disputes. It has merely introduced an intervening provisional stage in the dispute resolution process. Crucially, it has made it clear that decisions of adjudicators are binding and are to be complied with until the dispute is finally resolved."


A number of first instance decisions in the Technology and Construction Court have striven to implement the policy of Parliament. Enforcement proceedings, as they are called, are brought using the Part 8 procedure of the Civil Procedure Rules and habitually there is a claim to summary judgment. Judges of the Technology and Construction Court have rightly been astute to examine technical defences to such applications with a degree of scepticism consonant with the policy of the Act, aptly described by Ward LJ in R J T...

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