Adjudication
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KEYWORDS: |
Statutory Adjudication, Contractual Adjudication, Decision in writing, Contract in writing, Oral Variations, waiver, Section 107(5), Mr Justice Akenhead. |
In Treasure & Son Ltd v Martin Dawes [2007] EWHC 2410 (TCC) Mr Justice Akenhead dealt with a number of issues relevant to adjudication. Only one part of the judgment is examined since it is an important analysis which is highly persuasive albeit obiter.
The issue was the effect of an oral variation on the jurisdiction of the adjudicator to decide disputes referred to him and as a further point the operation of Section 107(5) of the Housing Grants Construction and Regeneration Act 1996.
The "oral variation" issue relates to whether or not an oral variation of the terms of the original written construction contract leads to the Adjudicator appointed having no jurisdiction.
The issue arises out of the Court of Appeal decision in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] BLR217. In that case, the contract between the parties relating to construction operations was not in writing. Disputes were referred to an adjudicator. The Court of Appeal decided that in effect there could not be a valid statutory adjudication where the agreement was not in writing as referred to in Section 107. The majority (Ward and Robert Walker LJJ) decided that all terms (including immaterial terms) had to be in or evidenced in writing as required by Section 107. The whole Court was satisfied that the terms of the agreement between the parties in that case were insufficiently recorded in writing in any event. Accordingly the adjudicator's decision was not enforceable because it was made pursuant to a contract which was not and was not sufficiently in writing for the purposes of the Act.
In summary the Court of Appeal decision is authority for the proposition that there was only a statutory right to adjudication if there was a construction contract in writing as defined by the HGCR Act 1996.
Mr Justice Akenhead distinguished the facts in RJT on the basis that the agreement to adjudication in the case before him was contractual and not statutory. The contract was the JCT Standard Form of Prime Cost Contract 1998 Edition with amendments 1 and 2. Articles 8 and 9A deal with adjudication and set out the right to adjudication and the rules that applied.
Mr Justice Akenhead recognised that the provisions may have only been inserted to comply with the HGCR Act 1996, nonetheless he observed there was nothing in the written contract which required the adjudication agreement to be treated as other than a contractual agreement. He considered that a contractual agreement to adjudicate was not undermined, jurisdictionally or otherwise, by the fact that the terms of the original contract containing the adjudication clause were orally varied.
Mr Justice Akenhead considered that there could only be such undermining if it was an express term of the contract itself that oral variations of the terms were not to be considered valid unless recorded or evidenced in writing. He considered that if the parties had agreed in a binding contract that disputes would be referable to adjudication, then some oral variation to the terms of that contract did not itself undermine the contractual enforceability of the adjudication process. He suggested there was some support for this view in Dean and Dyball Construction Ltd v Kenneth Grubb Associates [2003] EWHC 2465 (TCC).
The above statements by Mr Justice Akenhead are obiter as he held that there was no oral variation of the original construction contract at all. Mr Dawes sought to persuade the Court that there was a material oral variation of the terms of the construction contract, and therefore the onus was on him to establish that there was such an oral variation. The evidence did not establish that there was any such oral variation.
Mr Dawes argued that the disputed claim referred to the Adjudicator was a claim simply based upon the original (unamended) construction contract, but the Adjudicator decided a significantly different claim. It was argued that he decided a claim that was dependent upon there being an oral variation. It was argued that the parties cannot enlarge the Adjudicator's jurisdiction beyond that which is set out in the Notice of Adjudication and/or referral relying on the decision of HHJ Humphrey Lloyd QC in KNS Industrial Services (Birmingham) Ltd v Sindall Ltd [2000] EWHC75 (TCC).
Mr Justice Akenhead decided that on the face of the Adjudicator's decision he had not based his decision on the existence of some oral variation to the terms of the contract. He held that as a matter of contract, it was open to the Adjudicator to find as he did irrespective of whether there was an oral variation of the terms.
The final point made by Treasure was that the light of Section 107(5) of the HGCR Act 1996 the lack of response to statements in a witness statement on the issue of oral variation during the adjudication proceedings was sufficient to constitute an agreement in writing. It was argued that the written statement that there was an oral variation was part of a written submission within the meaning of Section 107(5) and since it was not denied by Mr Dawes, the oral restriction constituted an agreement in writing.
Mr Dawes relied on the judgment of HHJ Bowsher in Grovedeck Ltd -v- Capital Demolition Ltd [2000] EWHC139 (TCC) where he considered it permissible following Pepper v Hart [1993] AC 593 to consider Hansard and the debate in Parliament. On that basis Boesher J. considered that there was no intention by Parliament that submissions made by a party to an unauthorised adjudication should give to the supposed adjudicator a jurisdiction which he did not have when he was appointed.
Although it was unnecessary for Mr Justice Akenhead to decide the point, he stated his disagreement with HHJ Bowsher QC. Mr Justice Akenhead considered that there was no ambiguity which required the adoption of the Pepper v Hart approach. He considered that Section 107(5) applied to any adjudication proceedings before, after, concurrent with or the same as those under review by the Court. He considered that there was no denial of the so-called oral variation and thus the exchange of submission and response constituted for the purposes of the HGCR Act 1996 an agreement in writing.
The reasoning of Mr Justice Akenhead will be applauded by those involved in resolving disputes in the construction industry. Most adjudications arise from terms in the contract which expressly prescribe adjudication as the first step in dispute resolution. On this basis the artificial division between contracts which are wholly in writing and those varied orally will be swept away.
Despite the commonsense approach one wonders whether the decision of Mr Justice Akenhead can be right in view of the reasoning of the Court of Appeal in RJT. The policy reason for the Court of Appeal construing Section 107 of the HGCR Act 1996 as they did, at least for both Ward LJ and Robert Walker LJ was that it was inappropriate for an adjudicator to be expected to deal with disputes as to the terms of oral contracts. In practice the same adjudicators routinely decide both statutory and contractual adjudications. Why should they be considered competent to deal with oral evidence in a contractual adjudication and not a statutory adjudication?
The legal principle that justifies the decision in RJT and by Mr Justice Akenhead must be that the Court will attempt to uphold the freedom of the parties to contract as they wish and not to interfere except in specific circumstances. In a contractual adjudication the agreement of the parties will determine the extent of jurisdiction conferred on the adjudicator. They have decided their tribunal and the Court will give effect to that decision. In a statutory adjudication the requirement for adjudication is implied in the contract by the HGCR Act 1996. In the case of an imposed dispute resolution process, the Court will only imply the limited jurisdiction clearly intended by Parliament.
Since the construction industry has adopted a wider jurisdiction for adjudication than the HGCR Act 1996, as seen in the standard forms of contract, it is surely time for the HGCR Act 1996 to be amended to reflect the clear wish of the industry and to remove the obvious anomaly between statutory and contractual adjudications. The 1996 Act was after all enacted for the benefit of the construction industry.