The issue of enforcement continues to occupy the court’s time. Cases decided in the last quarter covered a range of arguments, from compliance with contractual requirements, to compliance with statutory requirements, to the old chestnut of whether the contract was in writing.

Compliance with contractual requirements for service

In Primus Build Ltd v Pompey Centre Ltd & Anor [2009] EWHC 1487 (TCC), the court concluded that the claimant had complied with a contractual requirement that a Notice of Adjudication was “delivered personally” or sent by fax to the address stated in the contract when it served its Notice of Adjudication by recorded post, which was received by Pompey’s solicitor the following day. The court held that “delivered personally” meant something different than personal service. It simply meant actual delivery to the named address in the contract and the method of delivery did not matter. Since delivery to the named address had been accomplished, service of the notice had been valid.

The decision nevertheless sends out a warning to parties to check the particular wording of any service provision in their contract before attempting to effect service, to ensure compliance. If service is invalid, any decision made by the adjudicator will be made without jurisdiction and will be unenforceable.

Don’t let the adjudicator stray too far

Although the claimant succeeded on the issue of service, the court in Primus nevertheless held that the adjudicator’s decision was unenforceable because the adjudicator had breached natural justice in a material way, in that he had based his decision on his own, alternative, way of calculating loss of profi t – which both parties had agreed was an irrelevant method of calculation – and without giving the parties an opportunity to make submissions on the alternative approach he proposed. This part of the decision acts as a reminder that decisions must be based on the evidence relied on by either party and cannot go beyond that evidence unless, at the very least, the parties are given an opportunity to make submissions on any alternative approach the adjudicator seeks to take.

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Getting the notice right first time

The issue of the validity of service arose again in Vision Homes Limited v Lancsville Construction Limited [2009] EWHC 2042 (TCC), although here in a slightly different context. The referring party served an amended Notice of Adjudication after it had made a request to the Royal Institution of Chartered Surveyors to appoint an adjudicator. Paragraph 2 of the Scheme for Construction Contracts requires that Notice of Adjudication be served before the referring party approaches the nominating body to appoint an adjudicator. As a result, the court held that the adjudicator had made his decision without jurisdiction.

This case provides a warning to referring parties of the need to ensure that the Notice of Adjudication is drafted carefully, because it will determine the scope of the matters dealt with in the adjudication. Here, the amendment simply dealt with a request for a declaration that the responding party should be liable for the adjudicator’s fees. Since paragraph 25 of the Scheme, which applied to this adjudication, already confi rms that the adjudicator is entitled to a reasonable amount for his fees and can determine how those fees are apportioned, this was arguably an unnecessary amendment to make and one that proved very costly.

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Does the contract exist?

Section 107 of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) provides that the right to refer disputes to adjudication only applies where the “construction contract” (as defi ned by the HGCRA) is in writing. Although the fi rst part of the Draft Construction Contracts Bill repeals section 107, so that adjudication will apply to all construction contracts, whether agreed in writing or orally, the court in Adonis Construction v O’Keefe Soil Remediation [2009] EWHC 2047 (TCC) sent out a reminder that until section 107 is repealed, parties must ensure that their contracts comply with the requirements of that section if they wish the adjudication provisions to apply. The letter of intent used in this case did not constitute a “construction contract in writing”. As a result, the adjudicator’s decision was unenforceable.

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In Aceramais Holdings Limited v Hadleigh Partnerships Limited [2009] EWHC 1664 (TCC) the argument was different. There, the employer attempted to argue that there was no “construction contract in writing” because the terms of the JCT standard form contract chosen by the contractor had never been agreed formally by the employer. The court held that, where an employer chooses not to inform himself as to what a JCT form of contract is, or to concern himself with the detail of matters such as which form of contract was to be used, and left such details to the contractor, the employer could not then say that he did not agree to the form of contract chosen by the contractor. The fact that the employer never signed that contract would not, in such circumstances, lead to the conclusion that the terms had not been agreed so that there was no “construction contract in writing” for the purposes of adjudication.

The court accepted that a director of Aceramais (the employer) had told the contractor that its funder would require a JCT contract to be executed but had left the details of the contract documentation to the contractor. Those acting on behalf of the funder had also made it clear that the contract should be on a proper footing and that they wanted a JCT contract in place. They had chased throughout the material period for contract documentation to be completed.

A JCT 2005 Design and Build standard form of contract was eventually executed by the contractor and sent to the employer for signature, but the employer never signed it. In those circumstances, the court held that the March 2008 JCT form set out the terms to which the parties had agreed and, although not signed by Aceramais, the document clearly fell within the provisions of section 107(2)(a) and (c) of the HGCRA – it was a contract in writing within the meaning of section 107 and within the guidance given in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) [2002] BLR 217. The judgment in Redworth Construction Ltd v Brookdale Healthcare Ltd [2006] BLR 366 – that an agreement “in principle” to agree to a JCT form was insuffi cient to satisfy the HGCRA – did not apply in these circumstances: “This was not an agreement in principle; the parties here agreed, in the way I have described, to contract on the JCT form.”

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Is the withholding notice valid?

In Windglass Windows Limited v Skyline Construction Limited [2009] EWHC 2022 (TCC), Coulson J rejected the suggestion that section 111 of the HGCRA and the relevant part of the scheme does not require a withholding notice that sets out “valid” grounds for withholding money otherwise due. Neither did he agree with the suggestion that “as long as there is something which purports to be a withholding notice, then that is suffi cient to justify withholding, regardless of the contents of the notice itself.’’ The judge concluded that there was no meaningful distinction between a “valid” and an “effective” notice in section 111. The adjudicator had provided reasons as to why the withholding notices were ineffective – neither the amount proposed to be withheld nor the grounds for doing so had been set out. The adjudicator’s decision was therefore enforceable.

In William Hare Limited v Shepherd Construction [2009] EWHC 1603 (TCC), Coulson J held that the insolvency of an employer did not fall within the ‘pay-when-paid’ clause in a sub-contract that referred to so-called upstream insolvency. As a result, the contractor’s withholding notices were invalid and the sub-contractor was entitled to payment of approximately £997k plus VAT and interest. The judgment reminds parties of the need to examine closely the wording of any pay-when-paid clause that deals with upstream insolvency.  

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