Adjudication: Connex South Eastern Ltd v MJ Building Services Group plc

Minutes of a meeting that record the acceptance of material terms of a contract are sufficient to constitute a contract evidenced in writing for the purposes of section 107(4) of the Act. An adjudication clause will survive the discharge of a contract by acceptance of repudiation. The right to refer disputes to adjudication is not limited to disputes arising during the currency of a contract. Although there is no limitation period for instituting adjudication in the Act, adjudicators must take a limitation defence into account.

Judge Richard Havery QC, Technology and Construction Court

25 June 2004

The defendant (“MJ”) was a building contractor experienced in installing closed circuit television (“CCTV”) systems. In 2000, the claimant, Connex South Eastern Ltd (“SE”) held a franchise for the operation of railways in Kent and a company in the same group, Connex South Central Ltd (“SC”) held another franchise for a neighbouring area. SE and SC’s architect and project manager sent an invitation to MJ to tender for the installation of CCTV systems in 50 stations across the Connex SE and SC Networks. MJ submitted a tender and met with SE and SC to discuss the tender and the works. At the second of those meetings, SE/SC instructed MJ to proceed. That instruction was recorded in the minutes of that meeting. SE/SC did not issue a written order, and no contract between Connex and MJ was signed.

Govia Limited acquired SC in August 2001 and SE instructed MJ to stop work on the project until further notice. In correspondence, MJ claimed from SE the cost of materials that it had procured for the project. Then, on 29 November 2002 MJ wrote to SE claiming that SE had repudiated the contract and that MJ had accepted that repudiation.

On 24th February 2004, MJ served a notice of adjudication, seeking payment from SC and SE regarding the contract for the execution of installation works at 50 stations in the Connex SE and SC franchise areas. SE (and SC, although SC later settled its claim with MJ) sought declarations from the Court that there was no contract in writing for the purposes of section 107 of the Act, that MJ no longer had the right to adjudication under the Act as MJ had accepted SE’s repudiation of the contract, and that that notice of adjudication was an abuse of process.

The Court held that:

1. It was irrelevant that there was no written acceptance of MJ’s tender – the reference in the meeting minutes to SE’s instruction to MJ to proceed with the works was sufficient evidence of acceptance for the purposes of section 107(4) of the Act;
2. The acceptance of the repudiation of an agreement does not preclude the right to refer any dispute to adjudication: The court found that the principal in Heyman v Darwins Limited 1942 concerning the survival of an arbitration clause applies equally to adjudication provisions;
3. The Court rejected the submission that the right to adjudication “at any time” only applied to disputes arising during the currency of the contract. The Court commented that it was well established that adjudication could take place after the works under a contract had been completed. However, while there is no limitation period laid down in the Act for instituting adjudication, a limitation defence must be taken into account by the adjudicator;
4. There was no abuse of process in MJ commencing adjudication so long after its purported acceptance of SE’s repudiatory breach.