Oakley (William) v Airclear Environmental Ltd [2001]

This summary was provided by CMS Cameron McKenna LLP.

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

Absent a contract, it may nonetheless be possible to ground an adjudicator's jurisdiction by showing an ad hoc adoption by the parties of adjudication as a dispute resolution mechanism by way of an estoppel by convention

Etherton J, Chancery Division

4 October 2001

S&N employed Oakley and nominated AEL as mechanical and air-conditioning sub-contractors. No formal sub-contract was concluded. Oakley deducted loss and expense and other sums from AEL's stage payments. AEL said that Oakley could not do this because there was no sub-contract.

Oakley asked the President of the RICS to appoint an arbitrator to resolve the dispute, citing clause 35B of NAM/SC (which would have been incorporated if there was a sub-contract). AEL approached the RIBA to appoint an Adjudicator (again, as NAM/SC provided). Oakley wrote to the RIBA stating that "the following matters need to be addressed prior to any appointment: (a) whether a contract exists and if so between whom". Oakley played no further part in the adjudication. The Adjudicator decided that Oakley and AEL had concluded a contract, that he had jurisdiction and that the monies deducted by Oakley should be released to AEL. AEL served statutory demands on Oakley which it sought to set aside. It failed before HHJ Chambers QC, but succeeded on appeal to Etherton J.

Both judges found that there was no concluded sub-contract. However, HHJ Chambers QC held that there had been an ad hoc adoption of the NAM/SC dispute resolution provisions by the parties and that Oakley was estopped by convention from denying it because:

The parties had a common assumption that NAM/SC governed them. It was not possible for Oakley to say that the NAM/SC arbitration provisions applied without accepting that the NAM/SC adjudication provisions also applied.

The parties relied upon that common assumption, in commencing their respective proceedings.

AEL acted to its detriment in commencing an adjudication. Oakley's letter to the RIBA was too late to resile from its earlier position that there was a contract.

Therefore the adjudicator's decision and the statutory demands stood.

Without saying whether an ad hoc adoption of the NAM/SC dispute resolution provisions was possible, Etherton J held that a party would only be bound by an estoppel by convention to the extent that it would be unconscionable for that party to deny the common assumption. There was insufficient evidence to show that AEL's detriment had been anything other than minimal before Oakley's letter to the RIBA. AEL had only commenced the adjudication by asking the RIBA to appoint an adjudicator. Although it had obviously incurred some costs (presumably including the RIBA's appointment fee), it was impossible to conclude that it was unconscionable for Oakley to resile from the common assumption that NAM/SC applied.

Consequently, the adjudicator lacked jurisdiction, there was no debt because his decision was a nullity and so the statutory demands were set aside.

Absent a contract, it may nonetheless be possible to ground an adjudicator's jurisdiction by showing an ad hoc adoption by the parties of adjudication as a dispute resolution mechanism by way of an estoppel by convention.

This summary was provided by CMS Cameron McKenna LLP.

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

Click here to read full-screen | Click here to print the case