Galliford Try Construction Ltd v Michael Heal Associates Ltd [2003] EWHC 2886

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

The decision of an adjudicator, which is based on the conclusion that there was a contract between the parties, will not be enforceable if subsequent legal proceedings determine that this conclusion was wrong.

Judge Richard Seymour QC,  Technology and Construction Court

1 December 2003

MH was engaged as structural engineer to provide various pre-tender services in connection with a project to convert a hotel into residential apartments. G successfully tendered as design and build contractor for the project. After completing the services required under the pre-tender appointment, MH was well placed to secure an appointment to provide post-tender structural engineering services. MH provided some further engineering services while negotiations between the parties took place. A dispute subsequently arose as to whether a contract had been concluded between the parties in relation to the provision of the post-tender services.

Following correspondence between the parties' solicitors, the parties agreed to follow the Construction Industry Council Model Adjudication Procedure. An adjudicator found that a contract had been concluded between the parties, that the contract incorporated the 1998 ACE standard terms and that MH had breached certain of those terms. G made an application for summary judgment to enforce the adjudicator's decision.

MH argued that the adjudicator's decision was not enforceable because the adjudicator had no jurisdiction in the absence of there being a contract between the parties. Alternatively, if there was a contract, the contract was not "in writing" within the meaning of the Housing Grants, Construction and Regeneration Act 1996 ("the Construction Act"), and therefore the provisions of the Scheme for Construction Contracts (and thus the adjudication provisions in Part 1) were not incorporated into the contract between the parties.

Contrary to its case as put before the adjudicator, G contended that the contract between the parties did not incorporate the 1998 ACE standard terms which contained an express provision for adjudication, but instead argued that the contract was a "construction contract" within the meaning of the Construction Act, was in writing within the meaning of the Construction Act, and that the Scheme for Construction Contracts was therefore incorporated into the contract.

G also contended that even if there was no contract, or no contract in writing, the solicitors acting on behalf of the parties had agreed that the dispute (as to whether MH was in breach of contract) was to be referred to adjudication. MH's argument was that, in submitting to adjudication, it had reserved its position as to whether the adjudicator would have jurisdiction in relation to the dispute concerning the provision of post-tender services.

The Court found that there was no contract as to the post-tender services concluded between the parties. Because there was no contract between the parties, the adjudicator's decision, based on the conclusion that there was a contract between the parties of which MH was in breach, was wrong.

The Court distinguished the case of C&B Concept Design Ltd v Isobars Ltd [2002] BLR 93, which was referred to it by G. In that case, Sir Murray Stuart-Smith stated that the enforcement of an adjudicator's decision by summary judgment should not be prevented by arguments that the adjudicator has made errors of law in reaching his decision.

The Court noted that the situation in the present case was different in that it was not contended that the adjudicator had made an error of law. Rather, in deciding whether to enforce the adjudicator's decision, the Court was forced to revisit the issue upon which the correctness of the adjudicator's decision was based, that is, whether there was a contract between the parties. Further, the Court had to do this in circumstances where G had completely abandoned the basis upon which it succeeded at adjudication in that it no longer contended that a contract was in place.

In relation to G's change in position as to the contract terms, the Court noted it is close to an abuse of process of adjudication for a party to change the basis upon which it succeeded at adjudication in order to resist an objection to enforcement of that decision.

Both parties were found to have agreed, without qualification, to submit to adjudication. In so doing, the parties had agreed to the dispute resolution process under s108(3) of the Construction Act, that "the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings". The dispute as to whether or not a contract had been concluded had been finally determined in the Court proceedings and therefore, by this judgment, the adjudicator's decision was no longer binding and the Court refused to enforce it.

Summary: The decision of an adjudicator, which is based on the conclusion that there was a contract between the parties, will not be enforceable if subsequent legal proceedings determine that this conclusion was wrong.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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