Yuanda UK v WW Gear Construction

Yuanda (UK) Co Ltd v WW Gear Construction Ltd [2010] EWHC 720 (TCC)

The effect of amendments to contractual adjudication clauses within JCT Trade Contracts

Facts

The claimant was a contractor instructed to install a glazed curtain wall in a hotel constructed by the defendant. The contract entered into between the parties was a JCT Trade Contract amended to the extent that the entire provisions relating to adjudication were deleted and replaced with a clause which, amongst other things, stated that, should the claimant bring any issue to adjudication, it would be responsible for all of its and the defendant’s costs irrespective of the outcome of the adjudication. It was further held that interest for late payment by the claimant should be set at 0.5 per cent above the base rate. The claimant sought a declaration that the amended provisions were void and directions as to how they should be replaced.

Issue

The issues in this context were whether the amended clauses were in compliance with the requirements section 108 of the Housing Grants, Construction and Regeneration Act 1996 and the Scheme for Construction. If they were not what should replace them in the contract and thirdly, whether the rate of interest was a substantial remedy within the meaning of the Late Payment of Commercial Debts (Interest) Act 1998.

Held

It was held that whilst the 1996 Act did not contain any provisions in relation to costs and that a contract allowing an adjudicator to award costs would notionally be valid, in these circumstances the clause relating to costs had the effect of preventing the claimant from effectively bringing a claim. The clause should be replaced by the adjudication provisions contained in the Scheme for Construction. Thirdly, the contractual interest rate, having regard to the fact that the matter had not been negotiated between the parties, could not be considered a substantial remedy under the 1998 Act.