M Hart Construction Ltd (“MHC”) and P K Maintenance Ltd (“PKM”) initiated adjudication enforcement proceedings against Ideal Response Group (“IRG”) to enforce decisions made by an adjudicator. Jefford J reviewed the issues arising from the parties’ oral contracts and novation.

This case arises from a dispute over the works at the old Olympic Athletes Village performed under two contracts, initially by Mr Hart (who was then acting as a sole trader) and subsequently (allegedly) by MHC. IRG was engaged to repair water damage at the village which was subcontracted to the Mr Hart to carry out the works. An informal oral agreement between Mr Hart and IRG was that Mr Hart would carry out the works where both parties would deduct their costs from the sums paid to the IRG and split the profit equally. Later, the scope of the work was extended to retrofitting the village for residential use. However, these oral arrangements were not recorded in writing. When the works were complete, some remedial works were subcontracted to Mr Hart to do the works but engaged PKM to help with the works. A tri-partite arrangement was agreed with the profit to be shared three ways. 

Subsequent to the agreements, Mr Hart formed M Hart Construction Ltd and informed IRG that he would be trading through the company. Accordingly, MHC submitted invoices to IRG. When some invoices remained unpaid, three adjudications took place. MHC asserted that the initial oral contracts between Mr Hart and IRG had been novated to MHC which allowed it to bring claims. The adjudicator's first two decisions were in favour of MHC.

Jefford J refused to enforce the adjudicator's two decisions. It was held that IRG had a real prospect of defending the claims on the adjudicators' decisions as there had been no novation of the relevant contracts to MHC. Although novation requires no particular formalities, the witness evidence regarding novation was conflicting. Jefford J concluded that there was insufficient evidence to infer or imply that novation had taken place (Enterprise Managed Services Ltd v Tony McFadden Utilities Ltd [2009] EWHC 3222 (TCC)). However, the court did grant summary judgment for the sums awarded in the third adjudication in favour of PKM where the dispute had arisen under an admitted contract between the relevant parties. 

This case demonstrates the difficulties with oral contracts and novation. The amendments introduced to the Housing Grants, Construction and Regeneration Act mean that the right to adjudicate applies to oral contracts equally. However, difficulties often arise where there is no clear evidence as to what the parties’ contractual arrangements were.