Barrister Professor Rudi Klein considers the recent case of Connex South Eastern v MJ Building Services, in this article originally published in Electrical Times magazine:
"A full written order ... will be placed with the successful tenderer," said the invitation. MJ duly submitted their tender proposal and were delighted when they were invited to a meeting to discuss their tender in detail.
Things were looking up when MJ attended a meeting called on 15 September 2000 that was described as 'general kick-off'. At that meeting MJ was told to commence work immediately but no written order was issued by Connex and no contract between Connex and MJ was signed. But, from that meeting things began to go downhill. Here is MJ's catalogue of woe:
- 20 September 2000 - MJ informed that all the CCTV works were suspended until further notice but MJ had already committed considerable resources to the project.
- 20 November 2000 - MJ told that work was to be resumed following which MJ revised its programme to allow for all work to finish at the end of March 2002.
- 4 December 2001 - Connex informed MJ that work in respect of further installations was to be suspended.
Following further correspondence and meetings MJ informed Connex that the contract had now ended by virtue of Connex suspending the work.
However, by this time MJ had completed all the necessary works to be carried out within the Connex South Central franchise area.
The dispute
MJ was owed £362,914.12. Connex did not want to pay. MJ duly served Connex with a notice of adjudication on 24 February 2004. An adjudicator was appointed but rather than pay up, Connex challenged the power of the adjudicator to deal with the matter. Connex went to court. The adjudication was suspended.
Did MJ have the right to go to adjudication under the section 108 of the Construction Act? Connex said no:
- A right to adjudicate was dependent upon all the terms of the contract being in writing
- Since the contract had been brought to an end by MJ on the basis of Connex's alleged breach in suspending the works, the contract was now dead and, therefore, there was no right to adjudication.
In writing
Connex referred to the case of RTJ Consulting Engineers v DM Engineering (Northern Ireland) Ltd (2002) in which the Court of Appeal decided that the Act requires that agreements must be in writing, or at least, their material terms.
The problem was that Connex could not identify any express terms that were not in writing. But, not to be outflanked by MJ, they argued that there was no written acceptance of MJ's tender.
Judge Richard Havery rejected this. The minutes of the meeting held on 15 September 2000 (the 'kick-off' meeting) referred to Connex's instruction that work be commenced immediately. Since the minutes were written with the authority of the parties that constituted evidence under section 107(4) of the Act. This states:"An agreement is evidenced in writing [and is therefore an agreement in writing] if ....... recorded by one of the parties, or by a third party, with the authority of the parties to the agreement."
The Judge also accepted the point made by counsel for MJ that an agreement is not excluded from adjudication solely because it contains implied terms rather than express term, (for example there is an implied term in every construction contract that the parties cooperate to achieve performance of the contract).
Breach of contract
Did the alleged breach by Connex in suspending further work mean that the contract was at an end and therefore the provisions as to adjudication did not apply? Connex argued that adjudication was for dealing with disputes arising during the course of the contract that held up cash flow.
Connex had another argument up its sleeve. In referring the dispute to adjudication, MJ's action undermined the process of justice (in legal parlance "abuse of process"); MJ had taken 14 months to start adjudication proceedings after it had told Connex that the contract was at an end.
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Judge Havery rejected these arguments. The Act gave a right to go adjudication 'at any time'. There was no limitation period in which adjudication proceedings had to be commenced. The Judge considered speeches in Parliament at the time when the Act was under consideration. During one of the debates in the House of Lords Lord Lucas, acting for the Government, had said:
"As long as there is a possibility of a dispute arising under a contract, the right to seek adjudication will remain."
There had been an amendment to delete the words 'at any time' and substitute the words: 'within the period prescribed within the contract' but that amendment had been rejected.
Nonetheless, an adjudicator should take account of any limitation defence. Therefore if a claim is issued too late (more than six years after breach of a simple contract) the adjudicator should take this into account. If he fails to do so any payment made pursuant to his decision would give rise to a claim for restitution of the monies.
Comment
This case is yet another example of paying parties trying to avoid the inevitable, i.e. making payment by hiding behind the smoke screen of lack of jurisdiction on the part of the adjudicator. However, readers should ensure that everything that has been agreed has been recorded in, for example, correspondence, minutes and memoranda.
This article was originally published in Electrical Times magazine by Highbury Business Communications, a Voltimum UK Media Partner.
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