Redworth Construction Ltd v Brookdale Healthcare Ltd [2006] EWHC 1994 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

The statutory provisions relating to adjudication only apply to contracts in writing.  This case constitutes a cautionary tale to parties to construction contracts who proceed on an informal footing.  In this case, an order made by an adjudicator for repayment of damages for delayed completion was not enforced because the court found that the contract was not wholly in writing and therefore the adjudication framework instituted by the HGCRA did not apply.

This case also highlights the importance of choosing carefully which submissions and which documents to refer to the adjudicator.  Redworth was precluded from relying on certain documentation to argue its case before the court because it had not provided that documentation to the adjudicator to assist him in reaching a decision about his jurisdiction to decide the substantive dispute. 

HH Judge Havery QC – Queen’s Bench Division, Technology and Construction Court

Background

Brookdale appointed Redworth to erect a development.  The works overran, partly because of a variation to the design of the windows.  Both the original design and subsequent design variations of these windows had been produced by the architects and approved by Brookdale, therefore Redworth denied any liability for the delays that ensued.  Notwithstanding, Brookdale deducted damages from Redworth’s final account for delayed completion.

Redworth referred the matter to an adjudicator.  Brookdale contended that the adjudicator did not have jurisdiction as the parties had entered into an oral contract, or a partly oral, partly written contract, which did not constitute a contract in writing for the purposes of s.107 of the Housing Grants, Construction and Regeneration Act 1996.  The adjudicator reached a non-binding decision that he did have jurisdiction to determine the dispute and, in relation to the substantive issue, decided that Brookdale was to repay the sums deducted for delayed completion.  Brookdale resisted the adjudication order on the ground that the adjudicator had no jurisdiction to decide the matter put before him.

Redworth brought a claim for summary judgment enforcing the adjudicator’s decision.  The key issues that the court was called upon to determine were as follows:

1) Whether the contract was in writing;

2) Whether the contract included the JCT terms;

3) If the contract did include the JCT terms, whether section 107 of the HGCRA 1996 applied.

Contractual framework

In April 2003, a document was submitted to Redworth which contained a reference in the following terms: “The form of contract will be JCT Standard Form Building Contract with Contractor’s Design 1998…  The conditions of contract will be unamended.”.  The form was not attached to the drawings and other documentation, but specific clauses of it were referred to.

In September 2003, an updated version of this document was circulated.  On 21 November 2003, negotiations were conducted with reference to these two documents and an oral agreement was reached.  However, there was no mention of the JCT terms during the course of the negotiations that day.  A further updated version of the April and September 2003 documents was then issued in December 2003.  This document incorporated many amendments to the specifications and further information that had been agreed at the meeting on 21 November 2003.  It stated that the final date of completion was 25 April 2005. 

The only contract that was ever signed was a letter dated 24 February 2004 in which it was confirmed that a contract had been verbally agreed between Brookdale and Redworth to construct the development in the sum of £4.57million.

Decision

The court ruled that there was no contract in writing that complied with the requirements of s.107:  on 21 November 2003, there was at most a mere intention on the part of the parties to enter into a contract on JCT terms.  That intention was never implemented.  The JCT form of contract was never even signed, let alone executed as a deed.  It was not orally agreed, since it was not even discussed at the meeting.  Both parties considered the contract between them to be rather informal.

Redworth’s referral notice to the adjudicator relied solely on the reference to JCT terms in the April 2003 document and on an oral agreement made on 21 November 2003.  At no point did Redworth rely on the December 2003 document.  It was based on this evidence that the adjudicator reached the decision that he did have jurisdiction to determine the substantive dispute.  Whether or not he would have decided differently if he had been asked to consider the December 2003 document was not an issue that the court was prepared to determine.

Instead, Judge Havery held that the principle of election prevented Redworth from disavowing its submissions at a later date.  Redworth had elected to put their argument in a particular way in order to obtain a benefit, namely, the decision of an adjudicator in their favour, both as to his jurisdiction and substantively.  Redworth in consequence had obtained both those benefits.  Regardless of whether the same benefits could have been obtained by other arguments (and it was not clear that they would have been so obtained), Redworth was precluded from resiling from its election.  That is to say, Redworth could not blow hot and cold or approbate and reprobate its earlier argument. 

Terms stipulating the date of possession, the contract period and the date for completion of the works are manifestly relevant to the claim before the adjudicator, which was the recovery of sums withheld because the contract overran the agreed date for completion of the works.  These were terms that were only set out in the December 2003 document.  For this reason, the judge concluded that the contract (which contained the reference to the JCT terms and which Redworth had referred the adjudicator to in order to obtain the adjudication order) was not a contract in writing within the meaning of s.107 HGCRA 1996, ergo the contract was not one to which Part II of that applied.  In consequence, the adjudicator had no jurisdiction to hear the reference.

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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