Adjudication
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KEYWORDS: |
Adjudication, Housing Grant Constructions and Regeneration Act 1996, Formation of Contract, Agent, negotiations, ostensible authority, conduct, enforcement, HH Judge Frances Kirkham. |
In most adjudications, the jurisdiction of the adjudicator derives from the contract between the parties. If the existence of the contract is disputed, then unless this issue is itself referred to the adjudicator there are likely to be challenges to the fundamental jurisdiction of the adjudicator.
When faced with such a challenge, the adjudicator should carefully consider for himself whether or not he has jurisdiction. This may prove difficult because contracts may be formed in different ways and an inevitable detailed enquiry may be necessary. The adjudicator will rarely be given the time for such an enquiry.
This familiar issue arose in GPN Ltd (In Receivership) v O2 (UK) decided on 22 October 2004 by HH Judge Kirkham, and is of particular interest because the the law on the ostensible authority of an agent in negotiations to bind his principal is usefully set out in summary.
In April 2000, O2 was successful in the government auction of 3G mobile phone technology licences. This meant that O2 had to upgrade the facilities at approximately 1,900 sites. O2 negotiated with GPN to carry out the acquisition, design and construction on the sites to allow use of 3G technology.
GPN began work on the proposed upgrade in about June or July of 2000. On 26 July 2002 GPN was placed into administrative receivership.
A dispute arose as to GPN's entitlement to damages consequent upon O2's purported omission and/or suspension of work. On 28 April 2004 GPN gave notice of adjudication in relation to that dispute. An adjudicator was appointed. O2 challenged the adjudicator's jurisdiction to deal with the dispute. The issue was whether or not they had entered into a contract. A draft bespoke contract document was prepared in some 15 versions, but was never signed by either party. The adjudicator took the view that there was a concluded contract between the parties and proceeded with the adjudication. By her decision dated 16 June 2004, the adjudicator concluded (amongst other matters) that GPN was entitled to payment of £5,762,691 plus interest.
On 1 July 2004 GPN issued proceedings to enforce that decision.
GPN's case was that there was a concluded contract on two alternate bases which both relied upon the firm McCreadies having ostensible authority to bind O2. O2 had engaged McCreadies, a firm of quantity surveyors, and authorised them to discuss with GPN a schedule of rates for the construction element of work to be carried out. GPN argued that O2 had made continuing representations that McCreadies had ostensible authority to conclude the contract.
GPN's first case was that a contract was concluded orally between the parties following the dispatch of the GNP's email of 4 February 2002 to McCreadies, which was re-sent on 15 February 2002. There was a telephone conversation between GPN and McCreadies in which the list of sites be appended to the contract was agreed as the original list of 1,923 sites. That, said GPN, was when the contract was concluded.
GPN's alternative case was that a contract was concluded on or around 6 June 2002 when McCreadies sent GPN version 15 of the contract asking for GPN's signature.
O2 denied that McCreadies had authority to conclude a contract on its behalf. Its case was that McCreadies had authority to be involved in the preparation of draft contract documents and to negotiate terms. O2's case was that McCreadies did not have authority to bind O2 to a contract and at no time did O2 represent that it would be bound by any agreement reached between McCreadies and GPN.
The real issue then was whether McCreadies had the power to bind O2 to the terms of the contract which McCreadies had negotiated.
Judge Kirkham usefully set out the law on ostensible authority of an agent
"Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as agent on the faith of such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority."
"Where a person by words or conduct represents a third party that another has authority to act on his behalf, he may be bound by the acts of that other as if he had in fact authorised them. This doctrine, called the doctrine of apparent or ostensible authority, applies to cases where a person allows another who is not his agent at all to appear as his agent, to cases where a principal makes a reservation in his agent's authority that limits the authority which such agent would normally have but fails to inform the third party of this ..."
"An owner who by some conduct or statement has misled a contractor into thinking that the architect has full authority may well be held either actually to have authorised the architect to a contract on his behalf or, if not, to have clothed him with ostensible authority to contract. This, of course, would depend on the particular facts, but does not detract from the general principle that an architect, even if instructed to obtain tenders, has no ostensible authority to conclude a contract, and strong facts would be needed to rebut the presumption."
"in the absence of some express power acceptance [of tender] should be by the employer. It seems reasonably clear that an architect engaged [for the purpose of inviting tenders] has no implied power to bind an employer by the acceptance of tender .."
"If an architect exceeds the authority of his employment the employer is not liable for his acts unless there is apparent or ostensible authority ..."
"the law does not recognise, in the context of apparent authority, the idea of a self-authorising agent."
GPN's case was that the representation was made by conduct.
Part of GPN's case was that McCreadies' behaviour gave the impression that they had authority to bind O2. Judge Kirkham held that GPN could not rely on conduct by McCreadies as a representation by O2.
GPN relied on O2's not having informed GPN that there was a restriction on McCreadies' authority. Judge Kirkham held that silence in conjunction with O2's engagement of McCreadies to negotiate terms did not amount to a representation by O2 that McCreadies had authority to bind O2 to a contract.
GPN relied on the fact that McCreadies were able to and did agree a number of terms on behalf of O2 but without reference to O2 and gave the impression that they had authority to bind O2. To the extent that it was a representation by O2 made through McCreadies, Judge Kirkham accepted that this might be capable of amounting to a representation by O2. Judge Kirkham found that the fact that McCreadies had to refer back to O2 on some matters was an indication that there was a limit on McCreadies' authority and did not support GPN's argument that this gave the impression that McCreadies had ostensible authority to bind O2 to a contract.
Judge Kirkham found that a letter of intent dated 22 August 2000 indicated that McCreadies did not have ostensible authority to bind O2 to a contract. The letter envisaged a two-stage process. First, GPN and O2 were to agree terms. At a separate stage, there was to be formal execution of a contract.
Judge Kirkham found that McCreadies letter dated 6 June 2002 referred to the contract having been completed and requiring signature by both parties and gave the impression that McCreadies did not have authority to bind O2 to the agreement.
Judge Kirkham held that a distinction had to be made between the authority of an agent to negotiate and agree terms and his authority to bind a principal to a concluded contract. The evidence in the present case indicated that McCreadies had authority to do the former but did not have ostensible authority to bind O2 to a contract. On the basis of the pleadings and evidence, GPN could not demonstrate conduct which amounts to a representation by O2 that McCreadies had authority to bind them to a contract with GPN. It was clear from the extracts from Hudson that "strong facts" would be needed to rebut the presumption that a professional such as a quantity surveyor had no ostensible authority to conclude a contract. Judge Kirkham held that there was no evidence to support GPN's case, let alone "strong facts".
Judge Kirkham held that GPN has no real prospect of succeeding on its claim that McCreadies had ostensible authority to enter into a binding agreement on behalf of the defendant. Summary judgment be given in favour of O2 in respect of that head of claim.