Adjudicator – Jurisdiction – Enforcement – Claimant applying for summary judgment to enforce adjudicator’s award – Whether adjudicator being validly appointed – Application granted
The claimant was a groundworks subcontractor which carried out works for the defendant pursuant to a construction contract within the meaning of section 108 of the Housing Grants, Construction and Regeneration Act 1996. A dispute arose about payment, which the claimant referred to adjudication. The adjudicator found in favour of the claimant, declaring that the claimant was entitled to be paid £258,760.67 plus VAT and the adjudicator’s fee. When the defendant failed to pay the sums awarded, the claimant issued proceedings and applied for summary judgment to enforce the award.
The parties disagreed about how the contract was formed. The claimant said that it had been formed by an email sent to it by the defendant on 5 December 2014 which accepted an offer made by the claimant. The defendant said that it had been formed by either by a letter of intent on 8 December 2014 or by the letter of intent taken together with a subsequent exchange of emails on 18 December 2014 or by the placing and subsequent acceptance of a sub-contract order on 13 April 2015. It was the defendant’s case that, if the contract had been formed by (or including) the letter of intent or by (or including) the sub-contract order, the contract incorporated a standard form of JCT contract wording.
It was common ground that, if the claimant’s interpretation was correct, the defendant did not serve a pay less notice in time and the adjudicator’s conclusion on the claimant’s entitlement would have been correct. However, if one of the defendant’s interpretations of the substantive obligations imposed by the applicable contract was correct, it was at least reasonably arguable that a pay less notice sent on 26 August 2015 was valid and in time, and the adjudicator’s conclusions would have been wrong.
The claimant argued that once it was acknowledged that the adjudicator would have had jurisdiction and would have acquired jurisdiction by the same procedural route whichever contractual interpretation was correct, it was irrelevant that different contractual interpretations might have different substantive outcomes. The adjudicator had been validly appointed and even if he had misinterpreted the substantive contractual provisions and reached an incorrect conclusion, it would be no bar to enforcement of his decision.
Held: The application was granted.
(1) In general terms, a contract could not usually be construed by reference to the subsequent conduct of the parties. One of the limited exceptions to that general rule was that the subsequent conduct of the parties might be relevant when trying to identify what terms were agreed, at least where a contract was either wholly or partly oral or when one could not otherwise identify the terms from the contract itself. Here the allegation was that there was a contract made partly in writing (by the sub-contract order) and partly by conduct amounting to acceptance. Accordingly, it was unsafe to rely upon subsequent conduct as the parties might have misunderstood whether or not their conduct had in fact amounted to contractual acceptance, in which case their subsequent conduct was unreliable as a guide. The court needed to identify conduct that amounted to contractual acceptance: Miller v Whitworth Estates [1970] AC 583, Wilson v Maynard Shipbuilding Consultants AG Ltd [1978] QB 665, Maggs v Marsh [2006] BLR 395 and BVM Management Ltd v Yeomans [2011] EWCA Civ 1254 considered.
(2) The documents on which the defendant relied were consistent with the sub-contract order being the operative source of the parties’ contractual obligations. Merely continuing with the works after receipt of the sub-contract order would not of itself be sufficient to constitute acceptance by conduct because it would be equally consistent with continuing to perform under previous arrangements. Conduct was required which was clearly and necessarily referable only to the offer said to have been accepted. The references to pay less notices were equivocal since they would be a feature of any construction contract to which the the Scheme for Construction Contracts as laid down in the Scheme for Construction Contracts (England and Wales) Regulations 1998 applied. Similarly the reference to “a mechanism of the contract” was not referable only to the sub-contract order. It did not refer expressly to the sub-contract order and was a statement that could have been made even if the sub-contract order had not been sent and received. The distinction between jurisdictional challenges to enforcement and challenges alleging substantive error suggested that the issue in this case should be approached in two stages. The first question was whether the adjudicator had jurisdiction. By whatever route the construction contract was formed, the Scheme applied and no adjudicator nominating body was specified by the parties. The procedure for appointing the adjudicator was the same, being that laid down by the Scheme and the adjudicator had been appointed in accordance with the Scheme: Brogden v The Metropolitan Railway Co (1877) 2 App. Cas. 666, Jayaar Impex Ltd v Toaken Group Ltd [1996] 2 Lloyd’s Rep 437 and Purton v Kilker [2015] EWHC 2624 (TCC) considered. Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd [2004] 1 WLR 2082 distinguished
(3) It might be linguistically and technically correct to describe the defendant’s various alternative formulations as different contracts from the contract alleged by the claimant. But that difference should not be determinative when the court was concerned with one contracting process, the only question being which party had correctly identified where in that process the relevantly binding contract was formed. Thus the email of 5 December looked forward to the prospect of a letter of intent and placing of a formal order. And if the April 2015 sub-contract order was in fact the relevant contract, it might be described as the final stage of a process which involved the great majority of the works being done before its issue, in all probability, on some terms that were superseded by the sub-contract order. Where it was agreed that each of the alternatives was sufficient to found jurisdiction under the identical route of the Scheme, to rule the claimant out of court, because it might have misidentified the contractual provisions that would give the adjudicator jurisdiction under the Scheme, was to return to a formalistic obstacle course. The adjudication system was meant to provide quick and effective remedies to parties, equally accessible to those who were legally represented as to those who were not. The system now covered not only written contracts but also oral contracts which increased the likelihood that they might be mis-described.
William Webb (instructed by Birketts LLP) appeared for the claimant; Ben Pilling QC and Alexander Wright (instructed by DAC Beachcroft LLP) appeared for the defendant.
Eileen O’Grady, barrister
