Earls Terrace Properties Ltd v Waterloo Investments Ltd [2002] HT 02/237 TCC

This summary was provided by CMS Cameron McKenna LLP.

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The Housing Grants, Construction and Regeneration Act 1996 cannot be made to have retrospective effect if a construction contract, made before the Act came into force, is subsequently varied by an agreement that itself does not fall within the Act as a construction contract. Any adjudication commenced under that Act in relation to such agreement is therefore void and the adjudicator has no jurisdiction to act.

Seymour QC

14 February 2002

W entered into an Agreement dated 4 December 1996 to provide development, construction and a range of related services for E. The Agreement was varied on 20 July 1998 by another agreement described as a Deed of Variation. With one exception (of no significance here) this Deed of Variation altered the provisions concerning the fees payable by E.

A dispute arose in relation to the sums payable by E. W served on E a notice of adjudication pursuant to the statutory scheme. E started proceedings against W seeking relief, principally in the form of declarations, that: 1) the Deed of Variation was not a construction contract within the meaning of the Act; 2) that the adjudication commenced by W was void and of no effect; and 3) that the person appointed as adjudicator pursuant to the Act had no jurisdiction under the Notice of Referral served.

It was argued by E that the Agreement was not a construction contract because it was executed before the Act came into force. It was therefore not open to W to seek an adjudication pursuant to the provisions of that Agreement. Further, it was argued that the Deed of Variation was not a construction contract for the purposes of s.105 of the Act as it did not provide for the carrying out of construction operations. These arguments were accepted. W had argued that because the Deed of Variation was made to vary the terms of an Agreement that would have fallen within the Act had it been entered into after the Act came into force, the Deed of Variation was also brought within the Act. It was held that this could not have been the intention of Parliament because the Act was made to apply only to those agreements made after the Act came into force.

It was suggested, obiter, that it would be possible to vary a construction contract made before the Act came into force by a variation agreement which itself amounted to a construction contract if it provided for the carrying out of construction operations, as defined in s.105 of the Act. It was suggested that the provisions of the Act in this situation would apply to at least the variation agreement and possibly the to the original agreement (though no definite view was given on this point). In the current case, however the variations were not related to the services to be provided, but merely to the sums owed. The Deed of Variation was therefore not a construction contract for the purposes of the Housing Grants, Construction and Regeneration Act 1996. Furthermore, the period over which W were contractually bound had not been altered. For these reasons, the making of the Deed of Variation did not cause the Act to retrospectively apply to the original Agreement.

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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