The riddle of existence

If you get into an adjudication based on a variation to a contract that is agreed but not signed, is the adjudication valid? The High Court has just given us a clear answer to that one …

“This sort of thing happens all the time. The snag is sorting out the bill. But don’t quarrel about it, don’t fall out, call for the adjudicator. Easy really”

Dinmore Manor is located in the Herefordshire countryside. It has spectacular views across the Malvern Hills. And it has the builders in. The final account is knocking on the door of £15m. Martin Dawes is the owner. The work is all to do with Mr Dawes’ vision of creating a world-class stud facility for show-jumping horses. The builder, Treasure & Son, has already been paid £14m.

It was that well-known final fence, the final million or so, that caused horse and rider to stumble into a construction dispute. The experienced adjudicator Mr Paul Greenwood took it on. He decided Mr Dawes was to pay Treasure £1,018,821.00. But he didn’t pay.

Treasure went to the High Court to ask Mr Justice Akenhead for an enforcement order. The arguments there were twofold. The first was what’s known as the “oral variation” issue. The second was whether or not the absence of the adjudicator’s signature on his decision made it a nullity.

Let’s get that last one out of the way shall we? It made no odds. The adjudicator had plainly decided all the issues, had done so in time, and it was obviously his award, obviously published. No fences down.

The “oral variation” issue is much more interesting. I am grateful to Peter McCartney, of Contract Construction Consultants (Southern), for drawing my attention to the judgment.

Martin Dawes’ lawyers ran the respectable argument that, since the variations were oral and since the adjudicator’s award decided disputes about them, he had no legal authority, no jurisdiction to bind the parties. That argument failed. But suffice it to say, this confounded “contracts in writing”. The so-called rule in section 107 of the Construction Act is an awful mess. Come on parliament: please hoof it out.

Let’s see why the argument failed.

Martin Dawes entered into a JCT98 contract with Treasure & Son. If parties have orally agreed JCT98 when getting into contract the adjudication procedure applies even if there is no exchange of JCT document, no signature.

But it’s not unusual for a party in a fresh adjudication to say the dispute is about an agreement or agreements within a contract that are not in writing and, therefore, this technical fence bars the right to adjudicate. All this comes from a Court of Appeal decision in 2002 called RJT vs DM Engineering. That case decided that there is no statutory right to adjudicate unless there is a contract between the parties relating to construction operations that is itself in writing. In RJT there was merely a letter confirming an agreement for services, but it didn’t confirm all the oral agreements. Hence there was no right to adjudicate.

But what about a contractual right? If you and I agree orally to an adjudication clause when getting into contract then bingo, we have a contractual agreement regardless of the Construction Act. Most of the adjudications I do are contractual.

So, Treasure carried out numerous oral instructions after practical completion was achieved, and this involved a whole pile of works over two years. That’s not so odd. But it might mean the original terms are varied. So, if the JCT contract containing the adjudication machinery is varied to take on board more work, the dispute machinery still applies. In short, having agreed a contract with a contractual dispute system, it will apply to any changes made to that contract.

One other point. The judge was not satisfied that there was a variation at all. Seemingly, the builder and the architect and QS agreed, (with the employers agreement) “that the contract will continue to operate exactly as it had before”.

So the parties’ rights after practical completion are derived from the same contract as before. There was no sign of a mutual intention that the original contract be varied. And you and I know that this sort of thing happens all the time. Builders and architects and surveyors just get on with things. The snag eventually is sorting out the bill. But don’t quarrel about it, don’t fall out, call for the adjudicator. Easy, really.

Readers are invited to forward recent judgments for reporting in this column (with full acknowledgement) to: Tony Bingham, 3 Paper Buildings, Temple, London EC4Y 7EU. DX: 37164 Biggleswade

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