Judgment date: 1 July 2016
It was impossible for the court to grant summary judgment to enforce an adjudicator's decision in favour of the claimant builders in a construction dispute without a fuller evidential picture. Whether the parties had contractually agreed to JCT Minor Works terms, which included an adjudication clause, was a borderline issue.
Technology and Construction Court (“TCC”), Mr Andrew Bartlett QC, Sitting as a Deputy High Court Judge.
The defendant homeowners, John and Caroline Harrison (the “Defendants”) engaged Malcolm, Graham and Paul Goldsworthy, who traded as Goldsworthy builders (the Claimants) to perform building works to their property.
A dispute arose between the parties concerning an interim payment. The Claimants raised an adjudication seeking payment from the Defendants. The adjudicator’s decision dated 22 April 2016 was in favour of the Claimants and held that the Defendants were to pay the Claimants the sum of £72,400.25 plus VAT as interim payments due under the contract inclusive of interest at 5.5% per annum up to the date of the decision. It was also held that further sums would be due as continuing interest and reimbursement of the adjudicator's fee. The Defendants subsequently failed to pay. The Claimants made an application for summary judgment to enforce the adjudicator’s decision.
The statutory right to adjudicate under the Housing Grants Construction & Regeneration Act 1996 (the “Construction Act”) does not apply to residential occupiers. The parties would therefore have to have had a contractual agreement to adjudicate in case of dispute.
The Court rejected the Claimant’s application for summary judgment to enforce the adjudicator’s decision in their favour; with Mr Bartlett QC stating at [paras 86 and 87]:
“Whether the application of Minor Works terms, and therefore of the adjudication clause, was contractually agreed is a borderline issue. It cannot be confidently decided without the full evidential picture …” and “I reach this conclusion with a degree of regret. … In theory the next step would be to proceed to a full trial of the issue of whether the parties' contract included the adjudication clause. Such a trial would determine only the enforceability of the adjudicator's decision. It would not finally determine how much money is owing from the defendants to the claimants in respect of the works.”
The primary issue between the parties was whether they had contractually agreed to adjudicate in case of dispute.
If the court held that there was no such contractual right agreed between the parties, then the adjudicator would have acted ultra vires and therefore the decision from 22 April 2016 would be invalid.
The Claimants submitted that the parties had agreed to contract on the basis of the standard JCT Minor Works Building Contract, 2011 Edition (“MW”), which contains a provision for adjudication.
The Defendants submitted that although the parties had expressed an intention to enter into a contract based on MW, they did not do so as no final agreement was ever reached. The Defendants submitted that the works proceeded under an informal agreement between the parties which did not include an adjudication clause. The Defendants also submitted that the conduct of the parties was not consistent with a concluded agreement under a MW contract as the payment mechanism that was followed was inconsistent with those terms. The Defendants further submitted that even if the parties’ contract incorporated MW terms, it did not incorporate the adjudication clause.
The secondary issue was a contention by the Defendants that the adjudicator had no jurisdiction on the dispute over interim payments.
This contention was that the interim payment dispute had been overtaken during the adjudication itself by the issue of a final certificate and statement of account issued by the Claimants, which showed a balance due of just £8,661.46 plus VAT.
- The Court considered the facts that had been presented, starting with the appointment of the architect in 2011 up to the issue of a second final certificate in May 2016 (which was issued after consideration of the claimants' statement of account in March 2016).
- The Court focussed on the issues of parties proceeding with works without fully formalising the terms of their legal relationship. The court considered the similar issues in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG  UKSC 14,  1 WLR 753 where Mr Bartlett QC at paras 66 & 67 stated that:
- “The difficulty of analysis that arises in this case is similar to that in many other cases where The difficulty arises simply because the parties have not clearly expressed and formalised their position, so it becomes necessary to analyse unclear expressions and make the best sense of them that one can. … the High Court found that a contract had been concluded which excluded the standard form conditions which had been proposed, the Court of Appeal disagreed, finding that there had been no contract, and the Supreme Court disagreed yet further, concluding both that there was a contract and that it included the standard form conditions. At  the Supreme Court stated: The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.”
- The Court went on to note [paras 68 and 69] that the Supreme Court's discussion in RTS included further propositions that:
- it is possible that parties may agree to be contractually bound by agreed terms even though they defer other important matters to be agreed later; and
- contracts may come into existence, not as a result of offer and acceptance, but during and as a result of performance
- The court then concluded that “it can be appropriate to look at the parties' conduct for the purpose of determining whether and how a contract was made”.
- The court then refused to grant summary judgement to the Claimants for enforcement of the adjudicator’s decision. Mr Bartlett QC stated:
- “My factual finding in paragraph 32 above, that as at 6 November 2012 the use of the MW form was envisaged for the full works, does not amount to a finding that there was a contractual agreement by the parties at that stage to use the MW form and bind themselves to the MW terms.” [para 74]
- “In all the circumstances, without fuller evidence from both sides, in particular of the discussions lying behind the emails (ie, between the claimants on the one side and GJR as representing the defendants on the other side), I find it impossible for me to say that there is not a triable issue on the question whether the parties did or did not reach a stage where they agreed with contractual effect to the application of the Minor Works terms, with gaps where particular options were not filled in or agreed.” [para 82]
- “The primary challenge is more difficult to determine. Whether the application of Minor Works terms, and therefore of the adjudication clause, was contractually agreed is a borderline issue. It cannot be confidently decided without the full evidential picture. I am therefore not in a position to grant summary judgment to the claimants for enforcement of the adjudicator's decision.” [para 86]
The Court rejected the secondary challenge to the adjudicator’s decision.
The Court confirmed [para 64] that an adjudicator’s decision must be made on the basis of the facts as they are at the time of the decision. If a final certificate is issued during the adjudication, depending upon what the adjudicator has been charged to decide, it may have to be taken into account as impacting on the parties' dispute, especially if the certificate is unchallenged.
The court went on to note that in this case the final certificate was immediately disputed by a formal notice and by provision of the Claimant’s calculations for the final account. Therefore it held that the adjudicator was entitled to treat it with little weight.
The Court also rejected the Defendant’s claim [at para 65] that the Claimant’s statement of account showing a balance of £8,661.46 plus VAT had the effect of negating the existing dispute between the parties. The court said that the balance was a separate one yet to be claimed. The court upheld the Claimant’s submissions that this statement of account did not support any reduction to the accounts claimed in the adjudication.
For the full judgment see: http://www.bailii.org/ew/cases/EWHC/TCC/2016/1589.html