Executive Summary

Whilst it often happens in the construction industry that works are commenced (and often completed) without formal documentation in place, this case is a useful reminder of the need for certainty as to the contractual terms. It is especially important for contractors employed by residential occupiers to ensure that there is clear agreement as to whether the parties have a right to adjudicate.

This case also confirms that an adjudicator may take into account events (such as subsequent payments or certificates) which take place after the adjudication has commenced. However the adjudicator can also choose to disregard such payments or certificates if for example the sums are disputed.

The facts

This was an application to enforce an adjudicator's decision for the defendant homeowner ("Harrisons") to pay to the claimant builders ("Goldsworthy") £72,000 as interim payments under a building contract.

In defending the application, the Harrisons argued that there was no contractual term giving the right to adjudicate as they were a residential occupier and therefore the adjudicator had no jurisdiction. Goldsworthy argued that the parties had agreed, and proceeded on the basis, that the JCT Minor Works 2011 terms ("MW2011") applied, which contained the requisite adjudication provision.

Goldsworthy argued secondarily that the adjudicator had no jurisdiction to decide a dispute on interim payments because that dispute had been overtaken by the issue of a final certificate issued by Goldsworthy itself showing a balance due of only £8,661 ("the Secondary Issue").

Summary

The Judge considered whether the parties had indeed contracted on the terms of the MW2011. Referring and citing with approval the 2010 Supreme Court case of RTS Flexible Systems v. Molkerai Alois Muller GmbH, he noted that:

  1. Whether there is a binding contract between the parties depends not upon the subjective state of mind of the parties 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 essential terms required by law for the existence of a binding contract;

  2. 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

  3. Contracts may come into existence, not as a result of offer and acceptable, but during and as a result of performance.

Given that this was an application for summary judgment, the Judge could only decide in favour of Goldsworthy if the Harrisons had no real prospect of successfully defending the claim and that there was no compelling reason for trial.

The fact that the parties had repeatedly referred to the MW2011 terms in correspondence; had referenced the terms on the interim certificates; had included a 5% retention and had made reference to a specific MW2011 clause in the final certificate, it fell short of conclusive evidence that the parties had agreed to be bound by the MW2011 terms. Conversely, the Judge considered that the fact the parties had agreed terms of payment that were inconsistent with the MW2011 terms and had made no agreement as to the completion date or liquidated damages did not definitively establish that the MW2011 terms did not apply. Accordingly, the Judge found, with "deep regret", that it could not be confidently decided whether the parties did or did not reach agreement as to the basis of their contract. Given that there therefore remained a triable issue, he was unable to grant summary judgment in favour of Goldsworthy. He noted however that, had he decided that the MW2011 terms were to apply, he saw no sufficient reason to exclude the adjudication clause. In respect of the Secondary Issue, whilst the Judge recognised that the issuance of a final certificate during an adjudication may (depending on what the adjudicator had been charged to decide) have to be taken into account, the final certificate in this case, when properly understood, did not support any reduction to the amounts claimed in the adjudication. In any event, the final certificate was immediately disputed by a formal notice and he held that the adjudicator was entitled to give it little weight.