Adjudication
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KEYWORDS: |
Adjudication, Housing Grants Construction and Regeneration Act 1996, JCT Building Contract for a Home Owner/Occupier, fees, Contracts (Rights of Third Parties) Act 1999, The Unfair Terms in Consumer Contracts Regulations 1999, jurisdiction, District Judge Mark Rutherford. |
The judgment of District Judge Mark Rutherford in David John Cartwright v Miss Lydia Fay [2005] is of interest mainly because it is one of the few cases on the right of adjudicators to their fees and the legal arguments adopted in particular in relation to the Contracts (Rights of Third Parties) Act 1999. Also of interest is the approach taken on the application of the The Unfair Terms in Consumer Contracts Regulations 1999 in a situation of a professional consumer.
On 30 May 2001 Miss Lydia Fay entered into a JCT Building Contract for a Home Owner/Occupier with Colonial Preservation & Construction Ltd.
Clause K of the contract allowed either the customer or the contractor to start court proceedings to settle any disputes or alternatively to have disputes decided by an adjudicator appointed under an adjudication scheme run by the Royal Institute of Chartered Surveyors (RICS) or the Royal Institute of British Architects (RIBA) and provided:
'If the customer or the contractor chooses adjudication to decide disputes they both accept that the cost rules and procedures Involved will become part of this contract"
Colonial commenced adjudication and David John Cartwright was duly appointed adjudicator by RICS on 19th February 2002 and issued his terms on 21st February 2002.
Under the RICS scheme his fees could not exceed £750.00 (Rule 10) with the apportionment of those fees being at his discretion (Rule 11).
Mr Cartwright issued his decision on 13th March 2002 with an invoice to the parties of the same date apportioning his fee on a 50/50 basis. On 24th June 2002 the 50% of the fee due from Colonial Preservation & Construction Ltd was paid. The amount of £282.37 plus VAT of £49.42 totalling £331.79 due from Miss Fay was outstanding.
Mr Cartwright sought the outstanding balance of his fee plus interest pursuant to the provisions of s 69 of the County Court Act 1984 at the rate of 8% per annum before District Judge Mark Rutherford in David John Cartwright v Miss Lydia Fay [2005]. Judgment was given on 9 February 2005.
There were five issues.
Cartwright relied on Section 1 (1) of the Contracts (Rights of Third Parties) Act 1999 which provides that:
"person who is not a party to a contract ("third party") may in his own right enforce a term of the contract if -
(a) the contract expressly provides that he may, or
(b) subject to subsection (2), the term purports to confer a benefit on him.
(2) Subsection 1(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party."
Under the adjudication rules, Mr Cartwright was given an express right to impose liability for all or part of his fee on one of the parties in his decision, which the parties were obliged to comply with under their contract. Rule 13 allowed the adjudicator to take proceedings against the party responsible for paying his fee if that party did not pay.
District Judge Rutherford held that if the contract incorporated the adjudication rules then by virtue of those rules it expressly provided that Mr Cartwright could enforce the term which related to payment of his fees and that there was no intention that the parties did not intend the term to be enforceable by the third party.
Miss Fay did not dispute that she signed the contract containing the provisions for adjudication in clauses K 2 and K 3. Miss Fay complained that she did not have notice of the adjudication rules at the time that she signed the contract. Miss Fay contended that she was pressured into signing the contract without understanding its full terms, and that on that ground they were not binding upon her.
District Judge set out the relevant law stated in Chitty on Contracts 29th Edition:
"where the agreement of the parties has been reduced to writing and the document containing the agreement has been signed by one or both of them, it is well established that the party signing will ordinarily be bound by the terms of the written agreement whether or not he has read them and whether or not he is ignorant of their precise legal effect".
District Judge Rutherford held that in law a party who signed a contract to signify her acceptance was taken to agree to all of the terms printed on the contract, whether she had read them or not. The printed terms may by express reference, as in the instant case, incorporate other provisions which then become terms of the contract. Where the terms were incorporated by the terms of an agreement which was signed, the question of notice - which was material when no contract document is signed - did not arise. In L'Estrange v Graucob 1934 2 KB 394 pages 402-3 Lord Justice Scrutton said:
"In Parker v. South Eastern Railway Company Meilish L.J. laid down in a few sentences the law which is applicable to this case. He there said:
'in an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents.'
Having said that, he goes on to deal with the ticket cases [and then continued] when a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not".
District Judge Rutherford found that Miss Fay was not put under pressure to sign, that she had ample time to consider the contract, that she could have obtained a copy of the relevant Rules but chose not to do so. He held that she was bound in accordance with the principle in L'Estrange v Graucob.
Cartwright contended that Miss Fay was an interior designer by profession, had business dealings in a number of properties, made payment under the contract from a business account and probably only lived in the property covered by the JCT contract (1 Cavendish Place) for a short period in order to benefit from Capital Gains Tax exemption. Accordingly it was argued, when she entered into this contract it was part of her normal business. This would mean that she was not a consumer within the definition of section 3 of The Unfair Terms in Consumer Contract Regulations 1999. There was also a letter from her solicitor suggesting he thought she was not a residential occupier.
However Miss Fay's evidence was that the property was being renovated for her own personal use and that after completion of the works she resided there for some 2 years.
District Judge Rutherford held that a person in a particular line of business could be a consumer within the meaning of the Regulations when engaged in a personal activity.
District Judge Rutherford found that Miss Fay was engaged in the contract not as part of her business activities but in a personal capacity and held therefore that she was a consumer within the meaning of the Regulations.
District Judge Rutherford held that the claim was made under a contract between a supplier and a consumer. The terms were not individually negotiated and the Court had to apply the tests of fairness and good faith under regulation 5(1) as interpreted in D G of Fair Trading v First National Bank [2002] 1 AC 481 page 494 where Lord Bingham of Cornhill said:
"A term falling within the scope of the Regulations is unfair if it causes a significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith.
The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty.
The illustrative terms set out in Schedule 3 to the Regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties' rights and obligations under the contract. This involves looking at the contract as a whole. But the imbalance must be to the detriment of the consumer; a significant imbalance to the detriment of the supplier, assumed to be the stronger party, is not a mischief which the Regulations seek to address.
The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer.
Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations.
Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers, it looks to good standards of commercial morality and practice.
Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the Regulations are designed to promote."
Miss Fay relied on the judgment of His Honour Judge Toulmin CMG, QC in Gennaro Maurizo Picardi v Paolo Cuniberti [2002] EWHC 2923 (QB). In Picardi Judge Toulmin had to consider upon what terms the claimant architect had been engaged by the defendants, and in particular whether, as the claimant contended, he had been engaged on the RIBA Conditions of Engagement. Judge Toulmin found that the claimant had not been engaged on those terms. Had he found that the claimant had been engaged on the RIBA Conditions of Engagement issues would have arisen as to whether the provisions in those terms for adjudication and against the withholding of payment of fees were unfair for the purposes of the 1999 Regulations. Because the point as to unfairness had been argued Judge Toulmin dealt with it in his judgment briefly and his comments were obiter.
District Judge Rutherford distinguished Picardi because in that case there was no signed contract and Mr Picardi was in a position of trust advising Mr and Mrs Cuniberti. Further Picardi was not even cited in the case of Westminster Building Company Ltd v Andrew Beckingham [2004] EWHC 138 (TCC).
District Judge Rutherford observed that the fairness of an adjudication clause was considered by His Honour Judge Moseley QC in Lovell Projects v Legg & Carver [2003] BLR 452 at paragraphs 24-31. Although that case concerned a different form of contract - the JCT Agreement for Minor Building Works 1998 Edition, which included provision for adjudication and its procedure - it dealt with a number of points which also arose in the instant case. In Lovell it was conceded that the contractor was a seller or supplier for the purposes of the regulations. Schedule 2 of the Regulations provides an indicative list of terms that might be considered unfair terms and in Lovell paragraph (q) was relied upon which provides:
"Excluding or hindering the consumers right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, unduly restricting the evidence available to him or imposing on him a burden of proof which, according to the applicable law, should lie with another party to the contract."
Judge Moseley held in Lovell:
"I do not regard paragraph (q) as having any relevance to those terms in the minor works contract which provide for adjudication. Those terms do not exclude or hinder the consumer's right to take legal action or exercise any other legal remedy. On the contrary an adjudication only binds the parties until the dispute or difference is resolved by legal action arbitration or agreement (supplemental condition D7.1). The terms do not require the consumer to take disputes exclusively to arbitration. Nor do they restrict the evidence available to him or alter the burden of proof.
In any case Schedule 2 simply sets out a list of examples of terms which 'may. ..be regarded as unfair'. In my judgment the word 'may' does not confer any discretion. It simply introduces terms which may possibly qualify as unfair if the other requirements of Regulation 5(1) are satisfied."
Judge Moseley held in Lovell:
"... to be an unfair term a term must cause a significant imbalance in the parties rights and obligations arising under the contract to the detriment of the consumer, contrary to the requirement of good faith."
District Judge Rutherford considered that Judge Moseley held that the adjudication provisions did not exclude or hinder the consumer's right to take legal action etc because adjudication only bound the parties until the dispute was resolved by legal action or agreement. He observed that the same applied in the instant case.
District Judge Rutherford observed that Judge Moseley held that there was no imbalance because the adjudication provisions applied equally to both parties. He also observed that in Westminster Building Company v Beckingham [2004] BLR 163 at paragraphs 29-32 His Honour Judge Thornton QC relied upon and followed Judge Moseley's observations regarding adjudication. That case concerned a contract for the refurbishment of a residential house which was held to have been performed under the terms of the JCT Intermediate Form of Contract which provided by the adjudication of disputes between the parties.
Accordingly District Judge Rutherford held with regard to The Unfair Terms in Consumer Contracts Regulations 1999:
Miss Fay disputed Mr Cartwright's jurisdiction to determine the claim for payment for additional work and purported to engage in the adjudication process only on a without prejudice basis by a letter to the adjudicator by her solicitors.
District Judge Rutherford found however that any "without prejudice" term related only to extras. Variations were clearly covered by Clause D5 and condition 4 of the contract. Miss Fay, acting through her solicitor in the letter, had affirmed the contract and/or waived any want of jurisdiction.
District Judge Rutherford held that the objection was misconceived and that Mr Cartwright was acting within his Jurisdiction and was entitled to his fee.
District Judge Rutherford ordered Miss Fay to make payment to Mr Cartwright of £331.79 plus interest @ 8% giving an overall total of £401.52, and to pay the Court fee of £50, the fee on the witness summons of £30 and the expenses of the two witnesses £102.46.