This was an application to set aside an award, pursuant to s.67 of the Arbitration Act 1996, on the grounds that there was no arbitration agreement, and so the Tribunal did not have jurisdiction over the dispute. Deputy Judge Buehrlen QC had to consider whether the contract incorporated clause 11 of LGK’s standard conditions which made provision for adjudication and then arbitration under the Construction Industry Model Arbitration Rules (“CIMAR”).
The Judge described the evidence surrounding the formation of the contract as being incomplete. There were three adjudications; two started by LGK, and the third by MPB which was commenced by reference to clause 11 of LGK’s Terms. LGK commenced arbitration proceedings in relation to the decision made in this third adjudication.
MPB submitted that whilst LGK’s Terms were included with the Quotation they did not form an integral and indivisible part of it in that they were additional to the 4 page quotation itself. LGK said that on proper construction of the contract, the Order incorporated LGK’s Terms. Both the description of the work and the value were “based on” the various contractual documents listed in the Order. You could not sever LGK’s Terms from the first 4 pages of the Quotation; they were relevant to both the scope of work and the price. LGK’s Terms formed part of the Contract but they accepted that MPB’s terms took precedence in the event of incompatibility. But LGK also relied on the deletion by LGK of the words “It is required that you withdraw any of your conditions which are at variance with the conditions contained therein” as a refusal on the part of LGK to withdraw any of its T&Cs. As MPB’s Terms were silent as to dispute resolution, the arbitration agreement in LGK’s Terms applied.
The Judge agreed with MPB that one should be slow to conclude that the parties agreed that both of their standard terms should apply to the contract, given the inevitable risk of contradictions in those terms and resulting potential uncertainty. However, it is not uncommon for construction contracts to be set out in a number of different documents and to contain different sets of standard terms.
However, the Judge also agreed that, although not expressly referred to in the first 4 pages of the Quotation, MPB were given clear notice of LGK’s Terms. The scope of work and price set out in the Quotation were based on, and to be read in conjunction with, LGK’s appended terms and conditions. It followed that LGK’s Terms formed part of the Quotation and were an integral part of it. The contract was negotiated and drawn up by two construction companies. It was not a document prepared by lawyers. In the Judge’s view:
“a reasonable person having all the background knowledge which would have been available to the parties would have understood the express reference in the Order to be “based on quotation Q17729 Rev B dated 11/04/2016 …” as being a reference to the Quotation and as meaning that the Quotation was intended to form part of the Contract.”
Here, the parties did expressly incorporate the Quotation into their agreement and LGK’s Terms clearly formed part of that quotation.
It was also LGK’s case that MPB elected to rely on LGK’s Terms and clause 11 for the purposes of Adjudication no. 3 and subsequent enforcement proceedings and that as a result it was not now open to MPB to deny that LGK’s Terms and/or clause 11 were incorporated into the Contract pursuant to the doctrine of approbation and reprobation. The Judge agreed that MPB “clearly and unequivocally” elected to rely on clause 11 as setting out the dispute resolution provisions governing the parties’ relationship. Both the notice of adjudication and the Referral expressly relied on and referred to clause 11. In choosing to rely on clause 11 as the applicable dispute resolution mechanism for the purposes of the adjudication, MPB could not later challenge the second (arbitration) tier of that provision.