Building contract – Adjudicator – Jurisdiction – Dispute arising between parties regarding amounts due under building contract – Claimant builders applying for summary judgment to enforce adjudicator’s decision – Whether parties agreeing contract terms containing adjudication clause – Whether dispute being overtaken by issue of final certificate – Application dismissed
The defendant homeowners appointed architects to act for them in connection with building works. The architects sent the claimant contractors a proposed schedule of works which identified the defendants as the employer and the architects as contract administrator. No duration was specified for the works. The claimants provided a quotation for the roof works. They subsequently quoted in writing for further works, involving some demolition, a new garden access, and three trial pits. The defendants were residential occupiers, so there was no statutory requirement for adjudication.
A dispute subsequently arose in relation to the sums payable in respect of the building works. An adjudicator decided that the defendants were to pay the claimants £72,400.25, plus any applicable VAT, as interim payments due under the building contract, inclusive of interest at 5.5% per annum up to the date of the decision, with continuing interest and reimbursement of the adjudicator’s fee. The claimants applied to enforce the adjudicator’s decision.
The claimants contended that the parties agreed that the JCT Minor Works terms (MW 2011) were to apply, incorporating a provision for adjudication. The defendants argued that, although the parties expressed an intention to enter into a minor works form of contract, they had never reached final agreement on its terms. Instead, the work proceeded under an informal agreement, which did not include an adjudication clause. Moreover, the parties’ conduct was not consistent with a concluded agreement that the MW conditions should apply, because the payment mechanism actually followed was not the same as in the MW contract.
The primary issue was whether the parties had agreed contract terms which contained an adjudication clause. If they had not, the adjudicator had no jurisdiction. If they had, there was a secondary argument arising from the issue of a final certificate and a statement of account issued by the claimants themselves, showing a balance due of only £8,661.46 plus VAT. Since this was a summary judgment application, the court could only find in the claimants’ favour if the defendants had no real prospect of successfully defending the enforcement claim and that there was no other compelling reason for a trial: see CPR 24.2.
Held: The application was dismissed.
(1) The minor works form constituted a carefully designed package which, when properly filled in, set an agreed balance of costs, liabilities and risks. When parties intended to contract on a minor works form, but failed to complete it, the court needed to be wary of imposing on them a less complete contract, with a different balance of risks partly reflecting the minor works form and partly inconsistent with it: a contract which, if asked, they would not have agreed to. However, that deed not prevent a finding, if justified by the evidence, that the parties in fact chose to bind themselves contractually on the basis of an incomplete package. The difficulty of analysis arose in this case because the parties had not clearly expressed and formalised their position, so it became necessary to analyse unclear expressions and make the best sense of them that one could.
(2) Whether there was a binding contract between the parties depended not upon their subjective state of mind, but a consideration of what was communicated between them by words or conduct, and whether that led objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law required as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties had not been finalised, an objective appraisal of their words and conduct might lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement. Contracts might come into existence, not as a result of offer and acceptance, but during and as a result of performance. It followed that it could be appropriate to look at the parties’ conduct for the purpose of determining whether and how a contract was made. The conduct of the parties after the contract had been made might also be very relevant to an inquiry whether a particular term was or was not agreed: RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG [2010] UKSC 14, [2010] 1 WLR 753 and Great North Eastern Railway Ltd v Avon Insurance plc [2001] EWCA Civ 780, [2001] 2 All ER (Comm) 526 applied. Harvey Shopfitters Ltd v ADI Ltd [2003] EWCA Civ 1757, [2004] 2 All ER 982, Bryen & Langley Ltd v Boston [2005] EWCA Civ 973, [2005] BLR 508 and Twintec Ltd v Volkerfitzpatrick Ltd [2014] EWHC 10 (TCC), [2014] BLR 150 considered.
(3) The claimants’ case was that the relevant offer was the claimants’ quotation and the contractual acceptance was an instruction to commence works by email. The offer was made against the invitation in an email which expressly referred to the need to fill in a JCT MW contract, and the acceptance referred to JCT MW as being the basis of the tender. Without knowing what was said between the parties, and a better understanding of the proposed works than could be obtained on a summary judgment application, the court was not able to make a definite finding that the exchange of emails concluded a contract for the carrying out of the full works on minor works terms. Without fuller evidence from both sides, in particular of the discussions behind the emails, it was impossible to say that there was not a triable issue whether the parties had reached a stage where they agreed with contractual effect to the application of the minor works terms, with gaps where particular options were not agreed.
(4) An adjudicator’s decision had to be made on the basis of the facts at the time of the decision. If a final certificate was issued during the adjudication, depending upon what the adjudicator had been charged to decide, it might have to be taken into account as impacting on the parties’ dispute. That might in particular be the case if the certificate stood unchallenged; whereas here, the final certificate was immediately disputed by a formal notice and provision of the claimants’ calculations for the final account. Accordingly, the adjudicator was entitled to treat it as of little weight. Furthermore, the claimants’ statement of account showing a balance of £8,661.46 did not negate or reduce the existing dispute between the parties which the adjudicator was required to decide. That was an additional balance, yet to be claimed. The claimants’ statement of account did not support any reduction in the amounts claimed in the adjudication. Therefore, the secondary challenge would be rejected.
Omar Eljadi (instructed by Stephens Scown LLP, of Exeter) appeared for the claimants; Robert Stokell (instructed by Michelmores LLP, of Exeter) appeared for the defendants.
Eileen O’Grady, barrister
Click here to read a transcript of Goldsworthy and others v Harrison and another
