Adjudication Update

In an important judgment, the CA has overturned the decision of HHJ MacKay in RJT Consulting Engineers Ltd v DM Engineering Ltd. This is now the third adjudication case to have been considered by the CA. The judgment is important because it helps to clarify the requirement of S107 of the HGCRA, namely that to take advantage of adjudication, the relevant construction contract must be in writing or, at least, evidenced in writing.

At first instance, HHJ MacKay had taken what he termed to be a "purposive" approach to considering whether a contract was evidenced in writing. He had held that it was not necessary to identify all the terms of a contract and that since there was in this case a "comparatively great" amount of written material this would suffice. This material included a fee account, which identified the parties and place of work and meeting minutes, which identified the type of work being carried out.

The CA disagreed with HHJ MacKay's approach. Invoices, for example, are evidence of the existence of a contract. They do not define it. The whole of the agreement had to be evidenced in writing. The CA said that:-

"Certainty is all the more important when adjudication is envisaged to have to take place under a demanding timetable. The Adjudicator has to start with some certainty as to what the terms of the contract are.The written record of the agreement is the foundation from which a dispute may spring but least the Adjudicator has to be certain about is the terms of the agreement which is giving rise to the dispute."

A record of an agreement must be a record of a complete agreement. However one of the Appeal judges, Auld LJ had a slightly different view. He considered that it was the terms of the agreement material to the issue or issues giving rise to the dispute, which were important, not that every term however trivial must be expressly recorded or incorporated.

In Total M&E Services Ltd v ABB Building Technologies Ltd, HHJ Wilcox had to consider an application for the enforcement of a decision where ABB held that the Adjudicator had no jurisdiction to determine the dispute because the Notice of Adjudication had been given in the name of a different company. HHJ Wilcox rejected this argument since at all times both parties had been well aware at all stages of the true identity of the contracting party. No one had been misled. However he did caution parties to be careful where there are similar company names or a number of subsidiaries in a group of companies. Here precision might well be required.

Total had also tried to recover their costs of the adjudication as a separate head of damage. These costs were considerable, being almost £93k - Total having been awarded £462k in the adjudication. It was suggested that if a party fails to pay under a construction contract than it was foreseeable that the other party to that contract would go to adjudication and incur costs. HHJ Wilcox did not allow this. There was no provision in the HGCRA for the recovery of the costs of an adjudication. Therefore, they could not be recovered as damages. To allow such a claim would be to "subvert" the Scheme.

ABB claimed that the adjudicator did not have any jurisdiction to base his decision on additional works carried out by Total. These were a series of separate oral agreements. Again the Judge disagreed. The additional works were the same type of work, which was the subject of the original sub-contract. Thus the scope of that work was enlarged. S107(3) of the HGCRA refers to agreements made otherwise than in writing. Provided that the agreement refers to terms, which are in writing, then it is an agreement in writing. This was a contract varied orally by the parties. The contract as varied fell within the scope of S107. It is possible that these arguments may be re-visited following the CA judgement in the RJT case, which coincided, with this decision.

Finally, at the end of his judgement HHJ Wilcox ordered that ABB pay into court (and not direct to Total) pending a full hearing, that part of the claim, which related to a set off claim by ABB. The adjudicator had refused to consider the merits of that part of the claim in the absence of a valid withholding notice.

Other Cases of Interest - Costs

In Dunnett v Railtrack Plc, the CA outlined the potential consequences of not proceeding in accordance with a court's recommendation. The Claimant was given permission to make an appeal to the CA. However, when that permission was granted, it was "strongly suggested" that the parties attempt to resolve the matter through ADR. Railtrack, it appeared to the CA, refused to pursue that route. Therefore, even though the Claimant's appeal failed, the CA refused to make a costs order against her, as a result of Railtrack's refusal to consider mediation. This refusal was made prior to the costs of the appeal being incurred. The overriding objective of the CPR encourages parties to use ADR (particularly when it is suggested by the Court). Therefore in the CA's view, Railtrack at least should have fully considered ADR and not merely simply refused it.

In Humphreys v Cedaf Assets Ltd, Butterfield J. had to consider the consequences of a Part 36 payment. The Defendant paid in the sum of £60,000.00. Judgment was entered for the Claimant on one head of claim but a number of other heads of claim failed. The claim had tax implications and the Claimant was entitled to a sum of approximately £119k. As the Defendant was aware of these tax implications, it was clear they had made a payment in which had not protected them. Therefore, the effect of the payment was disregarded in relation to the question of costs. However, on the facts of the case as a whole, the Claimant was the unsuccessful party. He lost on the major issues, which required a substantial amount of Court time. Therefore, the Claimant had to pay 50% of the Defendant's costs of the claim. However, since the Defendant had itself made a counterclaim, which had failed, the Claimant was entitled to recover the costs of these.

In Admiral Management Services Ltd v Para-Project Europe Ltd, Burnton J. considered the consequences of an agreement to pay the costs of and incidental to a claim. The Claimant accepted that a company cannot recover its costs in respect of the time of its own employees engaged in investigating a claim. However it claimed that where employees were experts in the subject of the claim, it was entitled to recover sums for their work. Burnton J. agreed that the reasonable costs of expert employees would qualify, although an investigation would need to be carried out since it all depended on whether the employees were truly experts and on the nature of the work carried out. The Claimant was entitled to recover the net loss of revenue as a result of expert work carried out on the claim rendering unavailable staff to work on revenue producing work. Here, on the facts, the Claimant was not able to establish a claim on this basis.

Health & Safety

SDC Builders Ltd, (who pleaded not guilty) have been fined £100,000 plus costs of £60,000 following the death of a carpenter who was knocked down by a van on the site access road as he left work. No clear measures had been taken to assess the potential risks of the use of the access road by SDC, who according to Haworth J. had simply taken the attitude that the access road was not their responsibility.

Austin Brickwork Ltd (who pleaded guilty) have been fined £40,000.00 plus costs of £8,799.00 for breaching Section 2(1) of the Health and Safety Work Act following the death of an employee who was killed by a forklift truck driven by someone who was not trained to drive that truck. The Director of the company who had instructed the untrained employee to drive the truck was also convicted and fined £20,000.00 for admitting a breach of Section 37(1) of the Act. Section 37(1) states that: "Where an offence committed by a corporate body has been proven to be committed with the consent or connivance of a Director, Manager or Secretary of that body then that person shall be guilty of the offence as well."

Fenwick Elliott News

Two new associates joined in March, Jon Miller after 12 years at Masons and Nicholas Gould previously an assistant at Forsters. Jon, who started work as an apprentice at Matthew Hall, is an accredited adjudicator and Fellow of the Chartered Institute of Arbitrators. He also sits on the board of the Institute of Management, City branch. Nick, a qualified chartered surveyor and member of the SCL Council, is the senior research fellow at King's College, Centre of Construction Law and Management. He is also the author of "Dispute Resolution in the Construction Industry".

Peter Webster has also joined as an assistant. At Masons since qualification in 1999, Peter has advised on contracts out in the Middle East and worked with local authorities, concessionaires, employers, and subcontractors.

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