UK: Construction Adjudication Update: Oral Contracts And Wycombe Demolition

Last Updated: 1 November 2015
Article by Alex Barker

A recent decision of the Technology and Construction Court has highlighted the increased latitude an adjudicator enjoys, now that oral contracts are within the statutory adjudication framework.

In order for the adjudication provisions in Part II of the Housing Grants, Construction and Regeneration Act 1996 ("the Act") to apply to a contract, the agreement in question must be a "construction contract", as defined by section 104 of the Act.

Previously, a construction contract had to be in writing (under what was section 107 of the Act). But with effect from 1 October 2011 in England and Wales, section 107 was repealed (by the Local Democracy, Economic Development and Construction Act 2009), meaning oral contracts were brought, for the first time, within the ambit of Part II of the Act.

This greatly increased the scope for the referral of disputes to adjudication. At the time, many articulated their fears about the ability of some adjudicators to decide competently issues of contract formation, where those issues could now involve thorny evidential questions concerning the terms of an unwritten contract.

Happily, such fears have proved largely unfounded. However, it is beyond doubt that the repeal of section 107 has changed the adjudication landscape. In a recent judgment of the Technology and Construction Court ("TCC"), Mr Justice Coulson touched on an interesting point about what he described as the "latitude" of an adjudicator to reach his conclusions in the post-section 107 world.

The Adjudication Proceedings

Wycombe Demolition Limited –v- Topevent Limited involved seemingly a fairly ordinary dispute concerning the enforcement of an adjudicator's decision. Topevent entered into a contract for Wycombe to demolish a site in, appropriately enough, High Wycombe. Topevent contended that the works were incomplete, and accordingly refused to pay several of Wycombe's invoices.

Wycombe commenced adjudication proceedings, seeking £137,252.93. This sum was made up not simply of Wycombe's unpaid invoices, but also included (among other things) a claim based on the revaluation of the works.

The adjudicator, finding in Wycombe's favour, concluded that "the invoices generally properly reflect the sums due", although he did make several adjustments based on a valuation of the works carried out.

Critically, one of the reasons underlying such adjustments was that there was disagreement about the date on which the contract came into existence. Unsurprisingly, the adjudicator's conclusion on this date had a knock-on effect on his findings on valuation.

The Enforcement Proceedings

Topevent refused to pay the sum ordered by the adjudicator and Wycombe therefore issued a claim in the TCC and applied for summary judgment. Topevent resisted enforcement on three substantive grounds, but for our purposes only the third and final ground is important.

Topevent contended that the adjudicator, in relation to the valuation dispute, did not decide the matter by reference to the parties' respective submissions. In fact, according to Topevent, he had decided it on a separate basis, such that he had gone off on a "frolic" of his own. Topevent therefore contended that his decision constituted a material breach of natural justice.

Coulson J rejected this submission. At paragraph 30, he said:

"An adjudicator has to do his best with the material with which he is provided. He has considerable latitude to reach his own conclusions based on that material, and he is certainly not bound to accept either one or other of the figures advanced by the parties."

In many ways, this conclusion was unsurprising. It is well-established that, generally speaking, an adjudicator enjoys the leeway to address a dispute in whatever way he considers suitable. He is not forced, as Coulson J reiterated, to side wholeheartedly with one party or the other (see, for example, Roe Brickwork –v- Wates Construction [2013] EWHC 3417 (TCC)).

What the Judge said next was more interesting:

"In my view, this latitude will inevitably be even wider now that the original constraint provided by the 1996 Act, that there had to be a written contract between the parties, has been removed by amendment. As happened here, an adjudicator's conclusion about the nature and terms of the contract could affect his approach to valuation issues."

Conclusion

Coulson J's aside is an important acknowledgment of the way in which adjudication has changed in the wake of the Local Democracy, Economic Development and Construction Act 2009.

The repeal of section 107 (and the consequent inclusion of oral contracts in the regime of statutory adjudication) has widened the "latitude" adjudicators enjoy when making their decisions. This is a natural consequence of the fact that adjudicators now find themselves having to decide on what constitutes the terms of unwritten contracts.

The judgment also provides a timely reminder to those in the construction industry that, for better or worse, the fact that a contract is not set down in writing does not mean that the provisions in the Act concerning statutory adjudication are excluded.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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