The Technology and Construction Court has recently given us two judgments looking at who is the party that has the right to adjudicate. In the first part of this two part series, we look at the recent judgment in Paragon Group Limited v FK Facades Limited concerning assignees under a construction contract.
The contract in this case was an amended JCT Minor Works Building Contract 2016, originally entered into between Office Depot International (UK) Limited, as employer, and FK Facades Limited, as contractor, on 17 October 2018. The contract was for remedial works to the roof installation at a commercial property in Ashton Moss, Greater Manchester.
In 2021, there was an assignment from the employer to OT Group Ltd. In 2024, OT Group Ltd assigned again to Paragon. In May 2025, Paragon notified FK Facades Limited that it was liable for liquidated damages due to delay and referred the subsequent dispute to adjudication. The adjudicator found in favour of Paragon, awarding them the sum of £80,500 in addition to requiring FK Facades Limited to make payment of the adjudicator’s fees.
FK Facades Limited refused to make either payment, prompting Paragon to commence enforcement proceedings.
The key issue to be determined on enforcement was whether Paragon, as an assignee, was entitled to refer the dispute to adjudication. If it did not, the adjudicator had no jurisdiction and Paragon could not enforce the decision.
Only ‘a party’ to a construction contract has the right to refer a dispute to adjudication under section 108 of the Housing Grants Construction and Regeneration Act (HGCRA).
FK Facades Limited's argument was that Paragon were not a ‘party’ within the meaning of the contract or for the purposes of the HGCRA and the Scheme for Construction Contracts Regulations, and therefore did not have the right to refer the dispute to adjudication. FK Facades Limited argued that contract defined party as ‘the employer’ or the ‘contractor’ and ‘parties’ as the ‘employer and the contractor’ without reference to permitted assignees.
FK further relied on the Court of Appeal comments in the Bexhill UK Ltd v Razzaq case that an assignee ‘does not become a party to any contract or deed which contains or gives rise to the right. The assignee will only become a party to the contract or deed if there is a novation’. Alternatively, FK Facades Limited argued, that Paragon’s claim was not a dispute under the contract as required by the HGCRA but was a claim under the assignment only.
Paragon’s case was that on a proper interpretation of the contract, particularly clauses 7.2 and 3.1, and when read against the backdrop of the general law in relation to assignment (including that assignment involves the assignment of all legal and other remedies in relation to such assigned contractual rights), a party included any statutory assignee of the original employer or contractor and thus this included Paragon.
The court found that in regard to the language of the Scheme for Construction Contracts Regulations, this was ‘essentially neutral’. It could not be confined to the narrow interpretation that it could only mean the contractor, the employer or a party novated from them given the rather indiscriminate references in various places to parties to the dispute or parties to the contract. The court considered it could "perfectly easily be read as if they included in brackets or any legal assignee of such party” without offending the wording of the scheme.
On the contract wording, the interpretation of the word ‘party’ had to be considered in the context of the assignment clause and the general law on assignment. The court was persuaded that as a statutory assignment passes all contractual rights as well as all legal rights and other remedies for the same as if they had been theirs from the beginning, this would include the right to adjudicate.
The result was that both 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. The court was not persuaded there were any practical difficulties with such an interpretation. Whilst FK Facades Limited asserted it would be prevented from raising any counterclaim against an assignee, as assignments only transfer the benefit and not the burden of a contract, the court disagreed. There were rarely if ever counterclaims permitted in adjudication in any event and FK Facades Limited would still be entitled to rely on any equities it had against the original employer as part of its defence, i.e. FK Facades Limited could reduce a claim from an assignee but not get a payment from an assignee.
FK Facades Limited’s alternative case that a claim by the assignee arises under the assignment and not the contract was rejected - as the assignment is an assignment of contractual rights and all legal and other remedies for the same and thus where an assignee is a party to the contract by virtue of the assignment, then the claim they are able to bring is a claim arising under 'the contract’.
In light of the foregoing, the court held that Paragon had the right to refer the dispute to adjudication and the adjudicator’s decision was enforced accordingly.
As noted in the judgment, prior to this decision there was surprisingly ‘no direct authority’ on whether an assignee is permitted to refer a dispute to adjudication. It also provides commercial certainty for assignees and contractors, and clarifies that any exclusion must be achieved ‘expressly or by necessary implication’ in the contract.
For further information, please contact our construction team.
