Menu

Adjudication Matters – January 2016

Print publication

12/01/2016

Happy New Year and welcome to our first Adjudication Matters of 2016, in which we discuss 5 key Technology and Construction Court (TCC) adjudication decisions from the past 6 months.

  • Can an adjudicator have jurisdiction even if it is not possible to identify all of the terms of the contract?: Rob Purton t/a Richwood Interiors v Kilker Projects Limited [2015] EWHC 2624 (TCC)
  • If the adjudicator incorrectly identifies the terms of the parties’ contract, will the adjudicator’s decision still be enforced by the courts?: RMP Construction Services Ltd v Chalcroft Ltd [2015] EWHC 3737 (TCC)
  • Does making payment of an adjudicator’s fees amount to acceptance that the decision is valid and enforceable?: Science and Technology Facilities Council v MW High Tech Projects UK Limited [2015] EWHC 2889 (TCC)
  • Is an agreement to negotiate the purchase price of land a construction contract? And; can the winning party at adjudication recover its legal costs from the losing party?: Husband and Brown Limited v Mitch Developments Limited [2015] EWHC 2900 (TCC)
  • If the parties to adjudication request that the adjudicator call a site visit or a meeting between the parties, can the adjudicator refuse to do so? Wycombe Demolition Limited v Topevent Limited [2015] EWHC 2692 (TCC).

Can an adjudicator have jurisdiction even if it is not possible to identify all of the terms of the contract?

Rob Purton t/a Richwood Interiors v Kilker Projects Limited [2015] EWHC 2624 (TCC)

Mr Purton trading as Richwood Interiors (Purton) claimed that an oral contract for joinery works to be carried out at the Dorchester Hotel had been agreed with Kilker Projects Limited (Kilker).

The works were carried out by Purton and some payments were made by Kilker. Purton submitted a final account requesting further payment however Kilker did not pay or serve a pay less notice.

Purton referred the matter to adjudication under the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the Scheme).

Kilker disputed that there had ever been a contract and argued that the adjudicator did not therefore have jurisdiction. The adjudicator rejected the argument that there was no oral contract and awarded Purton the further payment requested plus his costs.

Kilker did not make any further payment and Purton sought summary judgment in the Technology and Construction Court (TCC) to enforce the adjudicator’s decision.

The TCC held that there had clearly been substantial performance by Purton in performance of the works and by Kilker in the various payments which it had previously made to Purton. It was unrealistic of Kilker to argue that no binding agreement existed in these circumstances.

In order for the adjudicator to have jurisdiction, there needed to be a construction contract in accordance with the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act). The court held that this did not mean that every single term of the contract needed to be identified with certainty.

Kilker tried to argue a technical point that the dispute did not arise under the oral contract as put forward by Purton but under a different contract with different terms and that as such the adjudicator had made his decision based on the wrong contract.

The TCC rejected this argument stating that where:

  • there is a construction contract and therefore an adjudicator had jurisdiction; and
  • reliance upon a different contract would not affect the substantive outcome of the adjudication;

then this should not affect the court’s ability to enforce the adjudicator’s decision.

The judge ruled in favour of Purton and ordered that the adjudicator’s decision be enforced.

Comment

This case confirms that where there is an oral construction contract and it is not possible to identify every term of the agreement, the adjudicator can still have jurisdiction. The adjudicator will have a wide discretion to decide what terms have been agreed between the parties.

In order to avoid being bound by a contractual term which they did not intend to agree to, parties should consider recording all agreements in writing (e.g by way of an email confirming what has previously been discussed).

If the adjudicator incorrectly identifies the terms of the parties’ contract, will the adjudicator’s decision still be enforced by the courts?

RMP Construction Services Ltd v Chalcroft Ltd [2015] EWHC 3737 (TCC)

RMP Construction Services Ltd (RMP) sought enforcement of an adjudicator’s decision regarding RMP’s interim application for payment.

The adjudicator had decided that Chalcroft Ltd (Chalcroft) had failed to serve a payment or a pay less notice in time, which meant that the full amount applied for by RMP was the notified sum which should be paid by Chalcroft to RMP.

No formal contract was entered into. The parties agreed that RMP carried out its works pursuant to a construction contract (the Contract) under the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act), however they disagreed as to how the Contract had been formed.

RMP said that the Contract was formed by an email from RMP to Chalcroft on 5 December 2014.

Chalcroft said the Contract was formed either by a letter of intent on 8 December 2014, or by the same letter of intent taken together with a subsequent exchange of emails on 18 December 2014.

The parties agreed that the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the Scheme) would apply irrespective of how the Contract had been formed, however the deadline for Chalcroft to serve a payment or a pay less notice differed depending on which documents were held to form the Contract.

If RMP’s argument was correct then Chalcroft’s pay less notice had been served late. If Chalcroft was correct then it was arguable that the pay less notice had been served in time.

The Technology and Construction Court (the TCC) held that it was not clear from the evidence produced by the parties how the Contract had been formed and it was not possible as part of the enforcement proceedings to conduct a mini-trial (with disclosure of documents, cross-examination of witnesses etc) to determine this issue.

However the TCC held that how the Contract was formed did not affect the enforceability of the adjudicator’s decision. The Scheme applied to all of the possible formations of the Contract and the adjudicator had been correctly appointed in accordance with the Scheme. As such, the adjudicator had jurisdiction to determine the dispute and his decision was enforced.

Comment

This case is a reminder of the court’s willingness to uphold an adjudicator’s decision even if the adjudicator makes an error of law or fact.

Since adjudication was first introduced, the Courts have distinguished between questions going to the jurisdiction of the adjudicator and questions about whether an adjudicator who had jurisdiction has reached the correct substantive answer. If the adjudicator has jurisdiction to resolve the dispute that was referred to him, and he addresses the correct question without bias or breach of natural justice that would justify overturning his decision, then the decision will be enforced even if the adjudicator made an error as to the facts, or the law.

Here the adjudicator may have reached the wrong conclusion as to the terms of the Contract, however if this was an error of law it still did not prevent enforcement of the adjudicator’s decision.

Does making payment of an adjudicator’s fees amount to acceptance that the decision is valid and enforceable?

Science and Technology Facilities Council v MW High Tech Projects UK Limited [2015] EWHC 2889 (TCC)

Here, the Science and Technology Facilities Council (the Council) sought the enforcement of two adjudicator’s decisions against MW High Tech Projects UK Limited (MW High Tech).

MW High Tech argued that the adjudicator lacked jurisdiction to determine the dispute.

MW High Tech’s argument:

MW High Tech argued that the adjudication provisions of the Contract (which was the GC/Works/1 Single Stage Design & Build (1998) with Amendment 1(2000) standard form) did not comply with section 108 of the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act).

The TCC agreed that if the Contract did not comply with the Construction Act, the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the Scheme) would be implied instead, and the appointment of the adjudicator would have been made under the wrong set of provisions which would mean that neither of his decisions were enforceable.

However, the TCC held that the Contract here complied with the Construction Act so the adjudicator had been validly appointed and had jurisdiction.

The Council’s arguments

The Council argued that:

  1. MW High Tech had entered into an ‘ad hoc’ agreement to have the dispute decided by adjudication by this adjudicator; and
  2. by paying the adjudicator’s fees, MW High Tech had treated the adjudicator’s decisions as binding and had waived any right to challenge the adjudicator’s jurisdiction.
Ad Hoc Agreement

The Council issued a Notice of Intention to Refer a Dispute to Adjudication in November 2014. MW High Tech’s solicitors sent the Council a letter the next day confirming their instruction. The letter included a clear reservation of rights regarding challenging the jurisdiction of the adjudicator.

MW High Tech’s solicitors then sent a further letter the day after that agreeing to the identity of the adjudicator, but also reserving the right to challenge the adjudicator’s appointment in the future.

The TCC held that the agreement to the identity of the adjudicator did not prevent MW High Tech from raising jurisdictional challenges at the enforcement stage.

Payment of the adjudicator’s fees

The adjudicator’s decisions apportioned his fees between the parties. In accordance with the adjudicator’s decisions MW High Tech made payment of its proportion of fees to the adjudicator. The Council said that this meant that MW High Tech had treated the decisions as valid and they could not now challenge enforcement.

The adjudicator’s terms and conditions said that his fees would be payable even if his decisions were subsequently found by a court to be unenforceable due to lack of jurisdiction.

The TCC held that payment of the adjudicator’s fees did not mean that a party lost their right to challenge jurisdiction on enforcement. Acceptance of jurisdiction is fact specific and payment of the adjudicator’s fees will only amount to acceptance in clear cut circumstances.

The TCC’s Decision

Although MW High Tech had successfully reserved its right to challenge jurisdiction, it grounds for challenging jurisdiction were without merit because the Contract complied with the Construction Act. As such the TCC enforced the adjudicator’s decision and granted summary judgment in favour of the Council.

Practical Lessons
  • The GC/Works/1 Single Stage Design & Build (1998) with Amendment 1(2000) standard form complies with the Construction Act
  • The parties should check which adjudication rules apply before appointing the adjudicator.
  • When making payment of an adjudicator’s fees a party who wishes to challenge jurisdiction should set out in writing at the time of making payment that the payment is being made without prejudice to the right to challenge jurisdiction in future enforcement proceedings.

Is an agreement to negotiate the purchase price of land a construction contract? And; can the winning party at adjudication recover its legal costs from the losing party?

Husband and Brown Limited v Mitch Developments Limited [2015] EWHC 2900 (TCC)

Here the Technology and Construction Court (TCC)  held that an oral agreement for payment of an incentive fee to negotiate the purchase price of land was not a construction contract under the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act).

The TCC also confirmed that the legal costs of adjudication were not recoverable under the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the Scheme) unless the parties agreed the allocation of each party’s legal costs after the notice of intention to refer a dispute to adjudication (the Notice) had been served.

The Facts

Husband and Brown Limited (Husband) was engaged by Mitch Developments Limited (Mitch) to act as its agent in the purchase of a new site.

Mitch entered into an oral agreement with Husband that there would be a 25% incentive fee on any savings Husband negotiated on the purchase price.

An agreement for the purchase of the new site was reached for the sum of £325,000. A dispute arose as to whether Husband was entitled to the 25% incentive fee and Husband commenced adjudication on this point under the Scheme.

The adjudicator found in favour of Husband, however Mitch did not pay.

Husband commenced a claim in the TCC for the 25% incentive fee and also their solicitor’s costs and the adjudicator’s fees. Mitch sought a declaration that the adjudicator had no jurisdiction to make his award and that accordingly the award had no effect.

The TCC did not enforce the adjudicator’s decision however the TCC held that Husband was entitled to the 25% incentive fee because on the facts, it was a term of the oral contract agreed between the parties, that an incentive fee would be payable to Husband in the circumstances.

However Husband was not entitled to the costs of the adjudication.

Adjudication costs

The TCC did not enforce the adjudicator’s decision and Husband was not entitled to recover the adjudicator’s fees because the oral agreement to negotiate the purchase price of the new site did not fall into any of the following categories set out at s. 104 of the Construction Act:

  1. The carrying out of construction operations;
  2. Arranging for the carrying out of construction operations; and/or
  3. Providing labour for the construction operations.

Therefore the oral agreement was not a construction contract under the Construction Act and it was not reasonably foreseeable that the costs of adjudication would result from a dispute.

The TCC also held that whilst the adjudicator’s fees may have been recoverable if the oral agreement had been a construction contract, the solicitor’s costs would still not be recoverable because the Construction Act does not allow for the parties to recover their legal costs unless the allocation of legal costs has been agreed after the Notice has been served

This decision is a reminder that parties must budget for bearing their own legal costs when considering whether or not to refer a dispute to adjudication.

If the parties to adjudication request that the adjudicator call a site visit or a meeting between the parties, can the adjudicator refuse to do so?

Wycombe Demolition Limited v Topevent Limited [2015] EWHC 2692 (TCC).

Wycombe Demolition Limited (Wycombe) sought to enforce an adjudicator’s decision against Topevent Limited (Topevent).

It was common ground that there was a construction contract (the Contract) between the parties. The parties disagreed as to when the Contract was made and the relevant terms of the Contract.

Wycombe argued that the Contract was made on or about 8 April 2014. The adjudicator disagreed and found that the contract was made on or about 17 April 2014. This had an effect on the adjudicator’s approach to valuing Wycombe’s entitlement in his decision.

Topevent refused to make payment to Wycombe and argued that the adjudicator lacked jurisdiction on the following three grounds:

  1. Multiple disputes had been referred to the adjudicator;
  2. The adjudicator’s refusal to attend a site meeting/visit amounted to a breach of natural justice; and
  3. The adjudicator’s decision on valuation was said to be on a basis that was not advanced by either party and this amounted to a breach of natural justice.
Multiple Disputes

Topevent argued that two separate disputes had been referred to the adjudicator, one being the valuation of Wycombe’s claim for varied and extra work and the second being the circumstances in which Wycombe had terminated their works and left the site.

The TCC rejected this argument and found that:

  • The valuation of the amount due to Wycombe could not be decided unless the amount of incomplete work following Wycombe leaving the site was taken into account;
  • Even if the two issues were separate disputes, the TecSA Rules (under which the adjudicator was appointed) allow the adjudicator to deal with any further matters which all parties agree should be within the scope of the adjudication. Both parties had participated in the adjudication without raising multiple disputes as a jurisdictional challenge. There was never any suggestion by Topevent that the termination dispute should not be dealt with as part of this adjudication.
  • A party cannot rely on the fact that they did not have legal advice during the adjudication to excuse a failure to raise a jurisdictional challenge because this would allow a party to hide behind wilful ignorance or a deliberate failure to take legal advice in order to avoid the consequences of an adjudicator’s decision.
No Site Meeting/Visit

Topevent requested during the adjudication that the adjudicator attend a site visit or meeting. The adjudicator did not do so. Topevent now argued that this failure was a material breach of natural justice.

The TCC described this objection as ‘hopeless’. The procedure and process to be adopted during an adjudication and the steps required before the decision is issued to the parties, are all matters for the adjudicator to decide. It is up to him to decide what he needs in order to reach his decision. Here, the adjudicator carefully explained why a site visit/meeting was not a proportionate use of his time and therefore the costs of the adjudication.

Decision on a difference basis

Lastly, Topevent argued that the adjudicator failed to decide the valuation dispute on the basis of the parties’ respective submissions and instead decided it on a basis about which the parties had not had an opportunity to address him.

The TCC rejected this argument and held that the adjudicator had carefully considered both parties’ submissions and then provided his own valuation based on those submissions (as he was entitled to do).

The Court held that an adjudicator has to do his best with the material with which he is provided. The adjudicator has discretion to reach his own conclusions based on the material before him and he is not bound to accept either one or other of the figures advanced by the parties.

Comment

This case is another example of the court’s willingness to enforce an adjudicator’s decision. The adjudicator has a wide latitude as to how he approaches his decision and the courts will be reluctant to interfere with this. Parties should carefully consider the merits of any jurisdictional challenges before incurring the costs of raising them in enforcement proceedings.

Contacts