Adjudication
The Atlas Ceiling Co Ltd v Crowngate Estates Ltd (2000) TCC

© Daniel Atkinson   2000     23 July 2000

Part II of the Housing Grants, Construction and Regeneration Act 1996 which contains the adjudication and payment provisions, only applies to agreements relating to construction operations which are entered into after 1^st May 1998 (Section 104(6)). In time this restriction will disappear, but until then the meaning of "entered into" remains important. Useful guidance is given in the decision in The Atlas Ceiling & Partition Co Ltd v Crowngate Estates (Cheltenham) Ltd (2000)TCC.

Crowngate was the main contractor for the design and construction of the St Paul’s Medical Centre in Cheltenham. Atlas entered into an arrangement with Crowngate for the construction of the Centre. A letter of intent was issued dated 18^th December 1997 and work started in January 1998. Disputes arose which were referred to adjudication. Atlas sought to enforce the decision by way of summary judgment. Since there were disputes as to the date when the contract was entered into, His Honour Judge Thornton directed that the application for summary judgment should be transformed into a hearing of the issue of the adjudicator’s jurisdiction and gave directions for the serving of further witness statements.

The arrangement between the parties followed the uncertain route very familiar to those involved in the construction industry. On 3^rd April 1998 some time after the work had commenced, a standard form of contract in the Dom/1 form was signed by each of the parties. The signature of the standard form had been important due to pressures from the guarantor of Crowngate’s obligations to the Employer. It was a matter of commercial necessity that evidence of the existence of a subcontract was provided to the guarantors.

On 3^rd April 1998 when the Dom/1 form was signed there were problems as far as the scope of the works was defined. The Contract Sum in the signed form was for less work than depicted on the drawings. Since Dom/1 did not provide for bills of quantities, this meant that Atlas lost out to a considerable extent due to the shortfall. Atlas gave evidence that during discussions between the parties it had been agreed that the contract would not take effect until the scope of the work had been finalised and agreed and significantly that a bill of quantities for all of the work would be incorporated in the subcontract. It was on this basis that the contract was signed although left undated.

Four weeks after signature of the Dom/1 contract on 8^th May 1998, Atlas confirmed that it required the bills of quantities to be included in the Dom/1 subcontract. This was not challenged by Crowngate, but instead it issued a second letter of intent on 15^th May 1998 increasing the maximum sum to be expended. The second letter of intent was dated 18^th December 1997, the same date as the first letter of intent.

One year later matters arising form the Final Account were being discussed and it was agreed that the Dom/1 contract was to be exchanged without delay. On 12^th April 1999 a copy of the Dom/1 form signed on 3^rd April 1998 was sent to Crowngate by Atlas.

Crowngate disputed the evidence of Atlas and argued that the subcontract had been entered into by the parties by the signature of the standard form, which had contractual effect on that date. Since the date of signature was before 1^st May 1998, the contract was not a construction contract under the Act.

His Honour Judge Thornton preferred the evidence of Atlas. It appeared, on the face of it, that the contract had been entered into after 1^st May 1998. The parties lacked the necessary contractual intention to enter into the contract on 3^rd April 1998. Since contractual intention was as much a requirement of the entry into a valid contract as the requisite form, the first date on which a Dom/1 subcontract came into being was 12^th April 1999.

This however was not the end of the matter. Crowngate argued that the contract that came into being had retrospective effect to 18^th December 1997 relying on the decision in Fillite (Runcorn) Ltd v Aqualift (1989) CA. Crowngate argued that the Dom/1 subcontract varied the earlier letter of intent, became incorporated into it, and was to be treated as if the contract was entered into on 18^th December 1997.

His Honour Judge Thornton accepted that if Crowngate’s legal analysis was correct then it might well be that the contract was entered into in December 1997. He did not accept the analysis on the facts in this case. The Dom/1 agreement did not refer to the letter of intent and as a matter of construction should not be read with, or qualified by, the earlier document. In any event the retrospective effect of a contract is that it can include work already carried out but that does not affect the date when it is entered into for the purposes of the Act. That date was 12^th April 1999.

It was held therefore that the adjudicator had jurisdiction and judgment would be entered for the appropriate sum.

The decision is a clear analysis based on formation of contract principles and is to be welcomed. The situations when parties formally execute a contract but do not intend to be legally bound will be few in the construction industry. The above decision was based on very particular facts. Any party intent on following such an approach should clearly record its intention to avoid future disputes.