Stratfield Saye Estate Trustees v AHL Construction Ltd [2004] EWHC 3286

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The court held that for a construction contract to be in writing and therefore comply with section 107 of the Construction Act, all the express terms of the contract had to be in writing. It is not sufficient for only the material terms of the contract to be in writing. However, not all of the express terms have to be contained within the same document. In this case, the contract and the scope of the works were said by the court to be sufficiently evidenced in writing by letters, drawings and minutes of a meeting.

The Trustees of the Stratfield Saye Estate ("the Estate") engaged AHL Construction Ltd ("AHL") to carry out restoration works to a derelict property belonging to the Estate called Heckfield Wood House. Prior to commencement of the works, AHL and the Estate's representatives corresponded on a number of occasions in relation to the price of the work. It was agreed between the parties that the works would be carried out on a "costs plus" basis. AHL commenced work on 8 September 2003 and on that day there was a site meeting at which the scope of works was discussed in some detail. A formal minute of the site meeting was made. Following the meeting AHL proceeded with their building works. However, just over a week later on 16 September AHL were ordered to stop working because the Estate had decided to cancel the project.

AHL made various financial claims against the Estate, which were disputed. AHL subsequently referred these disputes to three separate adjudications. The third adjudication was commenced by AHL on 28 July 2004 and concerned compensation for the cancellation of the contract. The total sum claimed was approximately £132,000 plus interest. The Estate disputed this claim on a number of grounds, including the contention that the adjudicator lacked jurisdiction. On 15 September 2004 the adjudicator awarded AHL the sum of £73,400 plus interest for the losses which AHL had suffered as a result of the Estate's repudiation of the contract.

The Estate commenced proceedings for two declarations (which were subsequently amended) that:

(i) There was no construction contract that included a specified or defined scope of works, a programme or sequence of works, a programme or period for a specified scope of works or a completion date. Further, that there was no contract in writing governing any claim for loss of profit on work not carried out; and

(ii) The was no jurisdiction under the Housing Grants, Construction and Regeneration Act 1998 ("the Act") to decide the disputes raised by AHL's purported adjudication notice of 28 July 2004.

AHL defended the proceedings and sought the following declarations from the Court: that there was a construction contract under the Act between the parties that was evidenced in writing and that incorporated an agreed scope of works; the adjudicator in the third adjudication did have jurisdiction in this matter; and that the adjudicator's decision should therefore be valid and enforceable.

The judge considered that there were three central issues to decide:

  • Was there a contract for a defined scope of work?
  • Was that contract an agreement in writing within the meaning of section 107 of the Act?
  • Was the decision of the adjudicator a valid and enforceable award?

The judge reached the following conclusions:

  • There was a contract between the parties for a defined scope of works, which came into being on 8 September 2003. The scope of works was that which was shown on the three construction drawings (which were discussed by the parties' representatives at a meeting on 28 August and the site meeting on 8 September) and what was set out in the minutes of the site meeting of 8 September 2003. The judge held that, although there was no agreed programme and no agreed completion date for the works, neither of these was necessary in order for the contract to come into existence.
  • Having reviewed a number of legal authorities on the meaning of section 107 of the Act and the requirement that the Act only applies to construction contracts in writing, the judge decided that an agreement is evidenced in writing for the purposes of section 107 if all the express terms of that agreement are recorded in writing. He said that it was not sufficient to show that all terms material to the issues under adjudication have been recorded in writing. The judge said that in this case he believed that all of the express terms of the agreement were recorded in writing (thus preferring the majority view in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd. They had been recorded in a combination of ways, namely on the construction drawings, in the site meeting minutes and in the correspondence that passed between the parties prior to AHL's commencement on site. The judge said that in the event that he was wrong in this conclusion, he considered that, as a fallback option, AHL would be entitled to rely on the exchange of written submissions in the previous two adjudications as constituting a sufficient record of the agreement between the parties for the purposes of the Act.
  • The judge said that due to the conclusions that he reached in respect of points 1 and 2 above, he considered that the adjudicator's decision was valid and enforceable.

AHL therefore succeeded on the substantive issues and the Estate's claim for the declarations was dismissed.

This summary was provided by CMS Cameron McKenna LLP.

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