Management Solutions v Bennett (Electrical) Services Ltd [2006] EWHC 1720 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

The adjudication provisions of HGCRA 1996 only apply to written construction contracts or construction contracts sufficiently evidenced in writing.  This case examines the meaning of “contracts made in writing”.  Variations ordered orally under a contract by virtue of an express contractual term allowing the ordering of such variations do not make the contract a partially oral contract. 

Furthermore, where a construction contract appears to be in writing, the adjudicator will have jurisdiction to decide any dispute as to whether the contractual relationship between the parties is governed by those written terms or a preceding oral agreement.  In any event, on a contractual analysis, the subsequent written terms had superseded the oral contract by mutual agreement between the parties, so either way the written contract would govern the relationship between the parties and be subject to the HGCRA 1996.  The adjudicator’s decision was enforceable.

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

Background

This judgment concerned two separate applications for summary judgment to enforce two separate decisions of two separate adjudicators relating to two separate contracts which were entered into between the same parties.  Both contracts were for electrical installation sub-sub-contract works to be carried out by MS for Bennett.

Under Contract 1, the works had been completed and the final sum applied for but not paid.  MS started adjudication proceedings.  The adjudicator found in its favour and ordered Bennett to pay the sums owed, but Bennett had not paid the sums directed to be paid.

Under Contract 2, MS stopped works following disputes between the parties.  Bennett engaged a third party to complete the works and then commenced an adjudication claiming the additional cost of completing the sub-sub-contract works as a result of MS’ alleged repudiation of the contract.  The adjudicator found in favour of Bennett.  MS also did not pay the sums directed to be paid.

Both parties applied to the court for summary judgment enforcing the proceedings and the judge decided to deal with both applications together.

Decision

Contract 1

Bennett contended that, although Contract 1 was undoubtedly contained in writing, the effect of various oral variations meant that part of Contract 1 was not in writing and therefore not subject to the adjudication provisions of the Housing Grants, Construction and Regeneration Act 1996, which provides that it only applies to contracts in writing or evidenced in writing.
Judge Thornton QC found that Contract 1 allowed for the scope of the work to be changed within the limits provided for by the written contractual provisions.  Such variations were not varying the contract, they were merely instructions issued under the contract and with the authority of the contractual provisions that related to the carrying out of the work.

Therefore, the adjudicator did have jurisdiction to decide the dispute before him.  MS were entitled to the full sum awarded to it by the adjudicator.

Contract 2

MS contended that Contract 2 was never entered into.  Instead, a preceding oral contract, or a partially oral and partially written contract, formed the basis of the contractual relationship between the parties, which was not, as a consequence, one to which the adjudication provisions of the 1996 Act applied.

The court found that where there appeared to be a construction contract in writing, the document gave rise to a construction contract under which an adjudicator may be appointed.  The responding party would remain free to contend that the relevant contract did not contain the terms applicable to the dispute as a ground of defence within the adjudication, but it cannot subsequently contend that the adjudicator lacked jurisdiction.

Furthermore, even if the approach advocated by MS was adopted, Bennett would still succeed.  An oral contract was capable of being superseded by a subsequent contract in writing.  The oral contract would be discharged and replaced by the subsequent written contract, a result occurring by virtue of the agreement or consensual arrangement of the parties to that effect.

For these reasons, the court found that the adjudicator had jurisdiction to proceed and the resulting decision was enforceable.  The court ordered that the two sums should be set off against each other.

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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