England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Rolls Building, 7, Fetter Lane London EC4A 1NL
		6th December 2011

 


Mr Justice Akenhead:

1. These are adjudication enforcement proceedings between consultants and their employer, issues being raised about the extent to which the construction contract between the parties was in writing for the purposes of Section 107 of the Housing Grants, Construction and Regeneration Act 1996 ("HGCRA") and in relation to the extent and scope of the incorporation of the Scheme for Construction Contracts in circumstances in which the underlying contract does not comply with Section 108 of the HGCRA. This latter issue encompasses another issue which is whether the adjudicator was appointed by the correct nominating body

Background

2. Sprunt Ltd ("Sprunt") provides building consultancy services, primarily as architects. In 2001, the London Borough of Camden ("Camden"), invited Sprunt, amongst others, to tender for the provision of building consultancy services pursuant to a Framework Agreement. It is common ground that Sprunt was successful in this context (amongst others) and that there was a written contract made in July 2001 ("the Framework Agreement"). This contract was contained in or evidenced by Camden's "Tender Document for Building Consultancy Services 2001-2004/6". The returned tender dated 24 May 2001 from Sprunt provided time charge rates and percentage fees for projects ranging from values of less than £10,000 to over £1.25 million, such percentage fees extending from 15% down to 5.5%.
3. There were extensive Conditions of Contract within the Framework Agreement. Clause 4.1 envisaged that Camden would issue "instructions in the form of Commissions" to Sprunt. Sprunt would then be required to produce a "Proposal" in respect of the proposed Commission which would include timescale, method and fee required. If Camden decided to proceed with the Commission, its representative would issue a written "Order" accepting the Proposal. Clause 2.1 made it clear that the terms of the Framework Agreement were to apply to any Commission commenced before the end of the Contract Period.
4. Clause 25 addressed dispute resolution and provision was made for adjudication:

"25.2 …if any dispute shall arise between the parties at any time out of or in connection with this Contract or a Service, either party may refer such dispute for adjudication in accordance with the Scheme for Construction Contracts SI 1998 No. 649, Part 1 – Adjudication(Part III) as amended by this Condition and;

25.4 The Council shall be the specified nominating body for the purposes of paragraphs 2(1)(b) and 6(1)(b) of Part 1;

25.11 Where any decision [of] the adjudicator requires either party to make payment(s) to the other, such decision shall be suspended in relation to the requirement to make payment(s) until the earlier of any of the following:

a) after thirty…days of delivery of the adjudicator's decision if neither party has served notice on the other party in accordance with Condition [25.9].

b) receipt of a true copy of the Court judgement following the final determination by legal proceedings following a referral of the matters in dispute under Condition 25.9;

c) the matters of the dispute having been referred under Condition 25.9 to legal proceedings by either the parties, the referring party's formal withdrawal from such action;

d) Contract in writing between the parties following the expiry of the period referred to in Condition 24.2.6 as to the agreed allocation and/or award of such sums in full and final settlement of matters in dispute."

The English Court had jurisdiction for final dispute resolution.

5. Clause 34 provided:

"If any provision of the Contract shall become or shall be declared by any court of competent jurisdiction to be invalid or unenforceable in any way such invalidity or unenforceability shall in no way impair or affect any other provision of the Contract all of which shall remain in full force and effect."

6. There is unchallenged evidence that Camden placed some 37 Commissions with Sprunt over the following few years.
7. In the first half of 2003, Camden invited Sprunt to tender for the provision of building consultancy services in a number of disciplines for two projects, the Ampthill Square Estate and the Godwin & Crowndale Estate. This was to become known as the "Ampthill Square Estate" project. Sprunt submitted its tender dated 8 May 2003, offering to carry out the work at the Ampthill Square Estate for 6.9% of construction cost (or "Total Works Costs") and at the Godwin and Crowndale Estate for 8.2%. Hourly rates for services not covered were also quoted for individual grades of staff. By letter dated 15 July 2003, Camden wrote to Sprunt accepting that tender "at the rates and prices contained therein". "For clarification", the letter went on to say that Sprunt was appointed for both projects. It is common ground that this contract, to cover both projects, was not procured or ordered through the Framework Agreement; that is at least partly evident from the fact that the percentage fees were significantly above those quoted for the purposes of the Framework Agreement. However, the conditions of contract were virtually identical to those set out in the Framework Agreement referring amongst other things to the placing of Commissions and Orders. Although the numbering of the sub-clauses is somewhat different, the dispute resolution clause is effectively the same.
8. There is no dispute that the Ampthill Square Estate project was later split into two separate phases, A and B. It is not absolutely clear from the evidence precisely how this happened. However, by about June 2006, Phase A had largely been completed. The documentation disclosed by the parties in these proceedings suggests that prior to this date there had been issues between the parties about the payment of fees. An e-mailed letter dated 17 November 2005 from Camden to Sprunt suggests that Phase A related to the Godwin and Crowndale Estate and that works were being incorrectly certified and possibly that there were defects in the design and the works. The letter goes on to state:

"We agreed that Sprunt consequentially acknowledge and agree our contention that the contractual relationship in respect of phases 2, 3, 4 (now phase B) is Sprunt's general consultancy agreement is and that the Godwin, Crowndale Ampthill agreement is specific to phases 1 and 1A"

Further correspondence ensued and there were meetings between the parties on 23 May and 7 June 2006, in respect of which no minutes or even notes about what was discussed were put before the Court.

9. On 12 June 2006, Sprunt wrote to Camden in the following terms:

"Further to my letter dated 22 February 2006 and our meetings on 23 May and 7 June 2006 regarding various fee issues relating to Ampthill Square Estate I confirm the current position on both Contracts which incorporates the additional fees as discussed, as follows:

1. Phase A

Our fee percentage is 6.659% in accordance with our tender dated 8 May 2003 and your acceptance dated 15 July 200[3].

Currently, based on our anticipated Final Account figure of £7,575,878… the basic fee commitment for the Contract is £522,660.07

We have undertaken additional works at your request and the fees associated therewith, calculated in accordance with our Agreement, are as follows…

Based on the forgoing the current total fee commitment for the Phase A contract is £540,889.82.

2. Phase B

Based on our fee percentage of 6.659% in accordance with our Agreement for the Phase A contract and the current works budget of £9,035,783 for Phase B, plus the previously agreed community safety works designed statement and alternative scheme proposal of £6971.26, the basic fee commitment for the Contract is £608,664.04

We have undertaken additional work to your request and calculate the fees associated there with as follows:

Pre-Contract fee adjustment to reflect completion of the design of the scheme is up to and including Stage E on Phases 2, 3 and 4, now designated Phases B details of which had been agreed by Camden and residents… £61,163.90

Design of the landscaping scheme…all as detailed in my letter dated 22 February 2006 £126,536.33

The production of Option Appraisals… all as detailed in my letter dated 22 February 2006 £3750.00

Based on the forgoing the current total fee commitment for the Phase B contract would be £800,114.

However based on our discussions and agreement, subject to your written confirmation, I am prepared to abate our fee for the Phase B Contract only to that contained in the Kentish Town Fee Agreement, i.e. a fee of 5.5% in lieu of 6.659%.

This therefore reduces the above fee for the Phase B Contract as follows…

Current Revised Total Fee Commitment for Phase B £695,389.55

…The fee for Phase B will, of course, be adjusted in accordance with any agreed changes to the overall cost of the works….

I trust that the forgoing is in order and a true reflection of our discussions. I would welcome your early agreement in writing to the forgoing in order for us to be able to invoice in accordance with the attached Invoicing Schedule No 21 dated 12 June 2006 and move positively forward with the Phase B Contract."

10. There is no dispute that the parties proceeded thereafter on the basis that Phase B was to be dealt with separately, at the reduced fee of 5.5% and on the basis of the terms of the Framework Agreement. That this is so is clear from the fact that Mr Sutherland, Camden's in-house solicitor who has provided a statement in these proceedings, accepts Paragraph 8 of the Particulars of Claim which asserts that the Framework Agreement applied to the Phase B contract, albeit that he does say (Paragraph 23 (5) of his statement) that the Framework Agreement "is only part of the contract".
11. Phase B proceeded, starting in March 2007 with the works being completed, albeit late, in July 2009; the contractor was Apollo London Ltd. Disputes arose about Sprunt's fee entitlement. On 9 February 2011, Sprunt's claims consultants sent a document entitled "Contractual basis of Sprunt's claims for reimbursement of additional fees on Ampthill Square Phase B". Material parts are:

"1…Sprunt was engaged by…Camden to provide 'Building Consultancy Services for the period 2001-2004/6'…

6. It is provided in the Pricing Document [within the original tender document] that Sprunt will provide the services required for a fee of 5.5% against the total value of the Construction Contract (being over £1,250,000). It is noted that Sprunt reduced their fee percentage from 6.659% to 5.5% in or around June 2006 in order to assist Camden being able to appoint Sprunt for the Phase B works within the existing framework arrangements.

28. In consideration of the above Contract Conditions it is evident that:

…(v) There is no dispute that [Camden] has instructed Sprunt to carry out and provide the services that are the subject of the Building Consultancy Services Agreement referred to herein…

(vii) By agreement of the Parties [Sprunt letter to Camden dated 12 June 2006] the applicable fee for the Phase B works at Ampthill Square is 5.5%..."

12. Camden responded to this on 12 April 2010 almost on a pleading basis with a document entitled "Reply":

"1. Paragraph 1 is admitted.

6. It is admitted that the Pricing Document referred to in Paragraph 6 stated that Sprunt would provide the services required for the fee of 5.5% against the total value of the Construction Contract (being over £1,250,000). It is denied that Sprunt reduced their percentage fee from 6.659% in or around June 2006 in order to assist [Camden] to appoint Sprunt for the Phase B works within the existing framework arrangements.

28…(v) Paragraph 28 (v) is admitted…

(vii) It is admitted that the fee rate between the parties referred to in Paragraph 28 (vii) is 5.5%, but this is in accordance with the rate in the Agreement. It is denied that the rates relate to the letter dated 12 June 2006 from Sprunt to [Camden]…"

13. Correspondence and discussions continued until Sprunt instituted adjudication proceedings in July 2011.

The Adjudication

14. The Notice of Adjudication dated 8 July 2011 identified at Paragraph 3 that the parties had entered into the Framework Agreement and that the Framework Agreement applied to "the project known as 'Ampthill Square Estate Phase B'". It was asserted at Paragraph 12 that the adjudication provisions of the Framework Agreement applied. Paragraph 14 states:

"In and around June 2006 Sprunt were in negotiation with Camden for the provision of services with respect to the works to the Ampthill Square Estate Phase B. Sprunt's letter dated 12 June 2006 evidences Sprunt's agreement to reduce their fee to 5.5%. It is common ground that the Services would be provided under the Building Consultancy Services 2001-2004/6 Agreement."

The Notice then went on to set out in general terms the nature of the disputed claim.

15. The Referral Notice followed on 15 July 2011. This exhibited the Framework Agreement and the letter of 12 June 2006. Paragraph 16 states:

"In and around June 2006 Sprunt were in negotiation with Camden for the provision of services with respect to the works to the Ampthill Square Estate Phase B. Sprunt's letter dated 12 June 2006 evidences Sprunt's agreement to reduce their fee to 5.5% plus the additional payments as set out in the aforementioned letter. The Adjudicator will note that the letter of 12 June 2006 also provided for Camden reimbursing Sprunt for other services not included in the 5.5% fee, which services are being provided and the associated sums had been paid and are therefore not in dispute. Importantly, the further additional costs claimed in this Adjudication arising from the Services to be provided under the [Framework Agreement] are entirely separate to the additional services referred to in the said letter of 12 June 2006."

16. Mr Siamak Soudager was appointed as adjudicator by the RICS at the request of Sprunt. By letter dated 19 July 2011, Camden asserted that Mr Soudager did not have jurisdiction on the basis that the specified nominating body was Camden and in effect not the RICS. The Adjudicator wrote by letter dated 20 July 2011 to the parties saying that he had concluded that he did have jurisdiction.
17. Camden submitted its Response on 4 August 2011. Apart from dealing with Sprunt's claim on the merits, it repeated its jurisdictional reservations made in its letter of 19 July 2011 but also raised an additional jurisdictional reservation to the effect that the agreement was not in writing for the purposes of the HGCRA. It referred to the Framework Agreement and to the fact that under its terms there were to be commissions which were to be the subject of further agreements between the parties. It continued at Paragraphs 9 and 10:

"9. The material commission relates to property referred to as Ampthill Square Estate (phase B).The commission in respect of the phase B works at that property was not in writing. The only potentially contractual document identified by the referring party is specific to this commission is a letter dated 12 June 2006…That document does not contain all of the terms of the commission: it simply refers to an agreement to provide the services for a fee of 5.5% which, contrary to the terms of that letter, is in fact the fee set by the framework agreement for a building contract of this value.

10. In the circumstances the parties' agreement was not in writing for the purposes of section 107 of the [HGCRA]."

18. Other parts of the Response shed light on what Camden's position was. Paragraphs 27 to 33 deal with its case in relation to contracts and agreements:

"28(2) The referring party refers at paragraph 4 of the referring notice to "the Building Consultancy Services 2001-2004/6 Agreement" or "the Agreement"…[Camden] refers to this agreement between the parties as "the framework agreement"…

(3) In addition, pursuant to the framework agreement Camden engaged Sprunt to provide professional services in relation to phase B of works carried out at the Ampthill Estate, in other words in relation to the works required of Apollo under the building contract. This contract, made under the framework agreement in relation to the Ampthill B works, is referred to as "the commission". Notwithstanding the requirements of the framework agreement the commission was not in writing as has been acknowledged by Sprunt in writing.

29. For completeness the adjudicator should also note the following:

…(3) Sprunt provided the same professional services in relation to works required at the Ampthill Square estate under phase A (albeit not under the framework agreement) as were required in connection with phase B which is the subject of this adjudication.

30. (The reason why Sprunt's work for phase B was procured under the framework agreement but provided not under the framework agreement for phase A need not concern the adjudicator…)

32. The adjudicator should also note that there is no issue between the parties but that the services required of Sprunt in relation to Ampthill B were provided pursuant to a commission given under the framework agreement (albeit not in writing). That is apparent from the terms of the referral notice and all prior correspondence…"

19. There then followed a Reply from Sprunt which amongst other things stated in Paragraph 7 that the parties were agreed that the Framework Agreement "applies to the contract that is the subject of this adjudication and the Services provided by Sprunt". This provoked a Rejoinder which stated in relation to jurisdiction that "the services required under Ampthill B were necessarily the subject of a contract other than the framework agreement…"
20. On 5 September 2011, the Adjudicator issued his decision, but which adds nothing of substance relating to jurisdiction. In the result, he decided that Camden was to pay Sprunt £151,861.25 within seven days of receipt of a valid invoice from Sprunt, £31.88 interest per day from 5 September 2011 until payment and £12,702 in respect of his fees and expenses.

The Evidence and the Argument

21. Sprunt submitted three witness statements, two from Mr Gray and one from Mr Morris, whilst Camden submitted the statement of Mr Sutherland. Mr Gray in his first statement exhibited many of the documents from which this judgment quotes as well as highlighting a number of the arguments. He does refer to what he calls the "Ampthill Agreement" as being the agreement for the two projects which were tendered for and accepted jointly in the summer of 2003. He says that the project was later divided into two separate contracts (A and B). Mr Sutherland identifies that the contractual relationship was complicated by the fact that it arose sometime ago, that he had not been able to identify all possible documents relevant to the contract and that there was more than one contractual arrangement in place between the parties. He suggests that Sprunt put its case on one contractual basis in the adjudication and was now putting it on a different basis. He says that he believes that there were discussions between July 2003 and November 2005 about the appointment for Phase B and that they would have to have included an agreement to incorporate the Framework Agreement, an agreement to split out the Phase B consultancy services and terms upon which the Phase B works would be carried out. He refers to discussions which he has had with three people involved on Camden's side but they do not seem able to provide any detailed assistance as to what if anything was agreed orally between Sprunt and Camden in relation to Phase B. He goes on to say that he has "so far found little documentation that is directly relevant to the issue of what terms were agreed by the parties and whether those terms were agreed in writing." He says that this is likely to be "because of problems with the Defendant's records, the limited time available in which to respond to these proceedings. But it is also likely to be because those discussions were not in fact contained in documents". He suggests that there will have to be a trial on these matters.
22. Mr Gray says in his second statement that agreement between the parties was only reached at a meeting on 7 June 2006 to the effect that claims in relation to Phase A were accepted and that Phase B would go ahead on the basis of the Framework Agreement; he says that, although this was confirmed by Sprunt in its letter of 12 June 2006, there was no response to this letter but subsequent fee payments were made in accordance with its terms. He goes on to explain that the Framework Agreement contains all material terms such as the services required, duty of care, payment and disputes clauses. Mr Morris explains that Sprunt operated under the Ampthill agreement in relation to what was called the Phase A element. He says that after 12 June 2006, Sprunt operated under the Framework Agreement and both sides acted strictly in accordance with its contents. He says that Camden paid fees as set out in the letter in relation to both Phase A and B, including at the reduced fee percentage for Phase B.
23. Sprunt argues in this case that there was an effective agreement between it and Camden, which, although it emanated out of the Ampthill agreement, related to Phase B and was recorded in the letter of 12 June 2006 which was effectively accepted by conduct by Camden. It argues that the parties agreed that the Framework Agreement should apply to the Phase B project. In relation to the nominating body for the adjudicator, it argues that there were clauses which offended against Section 108 of the HGCRA and that the Scheme in relation to adjudication fell to be implied, leaving it free to seek nomination from appropriate bodies such as the RICS.
24. Camden argues that it is sufficiently clear that there must have been some terms of the agreement relating to Phase B which were not in writing and therefore the agreement upon which Sprunt relied in the adjudication and indeed in these proceedings was not in writing for the purposes of Section 107 of the HGCRA. It argues that a proper reading of the Scheme which it accepts is applicable would still entitle it to insist that it should be allowed to nominate and that there is nothing offensive to the HGCRA in one party nominating an adjudicator.

The Law

25. Sections 107, 108 and 114 of the HGCRA are as follows:

"107(1) The provisions of this Part apply only where the construction contract is in writing, and any other agreement between the parties as to any matter is effective for the purposes of this Part only if in writing.

The expressions "agreement", "agree" and "agreed" shall be construed accordingly.

(2) There is an agreement in writing—

(a) if the agreement is made in writing (whether or not it is signed by the parties),

(b) if the agreement is made by exchange of communications in writing, or

(c) if the agreement is evidenced in writing.

(3) Where parties agree otherwise than in writing by reference to terms which are in writing, they make an agreement in writing.

(4) An agreement is evidenced in writing if an agreement made otherwise than in writing is recorded by one of the parties, or by a third party, with the authority of the parties to the agreement.

(5) An exchange of written submissions in adjudication proceedings, or in arbitral or legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party against another party and not denied by the other party in his response constitutes as between those parties an agreement in writing to the effect alleged.

(6) References in this Part to anything being written or in writing include its being recorded by any means.

108 (1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.

For this purpose "dispute" includes any difference.

(2) The contract shall—

(a) enable a party to give notice at any time of his intention to refer a dispute to adjudication;

(b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice;

(c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;

(d) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;

(e) impose a duty on the adjudicator to act impartially; and

(f) enable the adjudicator to take the initiative in ascertaining the facts and the law.

(3) The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.

The parties may agree to accept the decision of the adjudicator as finally determining the dispute.

(4) The contract shall also provide that the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and that any employee or agent of the adjudicator is similarly protected from liability.

(5) If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply.

114 (1) The Minister shall by regulations make a scheme ("the Scheme for Construction Contracts") containing provision about the matters referred to in the preceding provisions of this Part…

(4)Where any provisions of the Scheme for Construction Contracts apply by virtue of this Part in default of contractual provision agreed by the parties, they have effect as implied terms of the contract concerned."

26. Paragraph 2 of the Scheme provides that "where a construction contract does not comply with the requirements of section 108(1) to (4) of the Act, the adjudication provisions in Part I of the Schedule to these Regulations shall apply." The Schedule to the Scheme contains the following material paragraphs:

"1. (1) Any party to a construction contract (the "referring party") may give written notice (the "notice of adjudication") of his intention to refer any dispute arising under the contract, to adjudication.

2. (1) Following the giving of a notice of adjudication and subject to any agreement between the parties to the dispute as to who shall act as adjudicator—

(a) the referring party shall request the person (if any) specified in the contract to act as adjudicator, or

(b) if no person is named in the contract or the person named has already indicated that he is unwilling or unable to act, and the contract provides for a specified nominating body to select a person, the referring party shall request the nominating body named in the contract to select a person to act as adjudicator, or

(c) where neither paragraph (a) nor (b) above applies, or where the person referred to in (a) has already indicated that he is unwilling or unable to act and (b) does not apply, the referring party shall request an adjudicator nominating body to select a person to act as adjudicator…

(3) In this paragraph, and in paragraphs 5 and 6 below, an "adjudicator nominating body" shall mean a body (not being a natural person and not being a party to the dispute) which holds itself out publicly as a body which will select an adjudicator when requested to do so by a referring party…

5. (1) The nominating body referred to in paragraphs 2(1)(b) and 6(1)(b) or the adjudicator nominating body referred to in paragraphs 2(1)(c), 5(2)(b) and 6(1)(c) must communicate the selection of an adjudicator to the referring party within five days of receiving a request to do so.

(2) Where the nominating body or the adjudicator nominating body fails to comply with paragraph (1), the referring party may—

(a) agree with the other party to the dispute to request a specified person to act as adjudicator, or

(b) request any other adjudicator nominating body to select a person to act as adjudicator.

(3) The person requested to act as adjudicator in accordance with the provisions of paragraphs (1) or (2) shall indicate whether or not he is willing to act within two days of receiving the request.

6. (1) Where an adjudicator who is named in the contract indicates to the parties that he is unable or unwilling to act, or where he fails to respond in accordance with paragraph 2(2), the referring party may—

(a) request another person (if any) specified in the contract to act as adjudicator, or

(b) request the nominating body (if any) referred to in the contract to select a person to act as adjudicator, or

(c) request any other adjudicator nominating body to select a person to act as adjudicator.

(2) The person requested to act in accordance with the provisions of paragraph (1) shall indicate whether or not he is willing to act within two days of receiving the request."

27. There are issues of interpretation and possibly policy in relation to the issue as to whether it is enforceably legitimate for a construction contract to legislate for the nomination of the adjudicator by one party to the contract; I will return to these under the discussion below.
28. There is a legal issue as to whether, when a contractual term does offend against Section 108 of the HGCRA, all the express provisions of the contract which address adjudication are dispensed with. The wording of Section 108(5) of the statute could be thought to be reasonably clear: "If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply". That suggests that a non-compliance with any of the key provisions of Section 108 about adjudication leads to the wholesale incorporation of the adjudication provisions of the Scheme; otherwise, the words used at the beginning of the sub-section would not be "If" but "to the extent that". That the legislators of this statute were aware of the difference is clear from Section 110 which requires construction contracts to provide for dates for payment and sub-section (3) states: "If or to the extent that a contract does not contain such provision as is mentioned in subsection (1) or (2), the relevant provisions of the Scheme for Construction Contracts apply" (emphasis added).
29. There has been a surprising amount of learning about this issue. Mr Justice Coulson in the 2^nd Edition of his book "Construction Adjudication" regards it as "resolved…that, if any part of the contractual adjudication agreement does not comply with the 1996 Act, the Scheme will be incorporated in its entirety. The cases were reviewed by Mr Justice Edwards-Stuart in Yuanda (UK) Co Ltd v WW Gear Construction Ltd [2010] BLR 435 at Paragraph 58:

"(a) C&B Concept v Isobars [2001] CILL 1781 (1^st instance); [2002] 1 BLR 93. The Recorder decided the whole payment provisions fell and were replaced by Scheme. On appeal the Court of Appeal felt it was not necessary to decide whether that point was correct because the appeal could be decided without it, but was content to assume the Recorder was right.

(b) Ballast plc v The Burrell Company [2001] BLR 529 – Court of Session. A Scottish case in which an adjudicator decided he was unable to reach a decision. The Court of Session said the decision was a nullity and it was unacceptable for the adjudicator to refuse to decide the dispute. Lord Reid indicated in the course of his judgment that he considered adjudication might be governed in part by the contractual terms and in part by statute since the Scheme may fill gaps where there was non-compliance with s108(1)(2)(4).

(c) John Mowlem v Hydratight [2002] 17 Const LJ 358. In this case HHJ Toulmin CMG QC concluded that the clauses 90.1 to 90.4 of Option Y(UK) 2 of the NEC2 standard form did not comply with parts of section 108. The Judge concluded at paragraph 31 of his judgment:

'I have considered whether, if some parts of the subcontract comply with the Act, they can be retained and the Act can be used in substitution for or to fill in those parts of the subcontract which are contrary to the Act. But the words of the Act are clear. Either a party complies in its own terms and conditions with the requirements of sections 108(1) to (4) of the Act or the provisions of the Scheme apply.'

(d) Hills Electrical &Mechanical v Dawn Construction Ltd [2004] SLT 477. In this Scottish case the court was concerned with payment terms. It was held the Scheme only applied to the extent that there were gaps in the express terms

(e) Aveat Heating v Jerram Falkus Construction [2007] EWHC 131. HHJ Havery QC followed the approach of Mowlem, and decided that where the adjudication provisions were non-compliant they were replaced wholesale by the Scheme, and indicated that the contractual provisions must be void. The Judge expressly disapproved the text of Keating 8^th edition paragraph 17.014 (all but the first sentence) and approved the footnote to it, namely:

"the extent to which the contractual mechanism does not comply with the Act is irrelevant. If it does not comply the whole contractual mechanism is tainted and falls by the wayside to be replaced by the provisions of the Scheme".

(f) Banner Holdings v Colchester Borough Council [2010] EWHC 139 (TCC), per Coulson J at paragraphs 42 and 43, where Coulson J said that there appeared to be a conflict of authorities although it was unnecessary to decide the point before saying

"I would offer the tentative view that, at least in relation to the adjudication provisions in s108, the wording of section 108(5) suggests that the whole Scheme replaces the express terms, regardless of how many (or how few) of those express terms fail to comply with the Act. More generally, I do not believe that it should be for the court to have to piece together a compliant set of provisions from two different sources. That would not make for certainty."

(g) See also Construction Adjudication (Coulson) paragraphs 3.01-3.10, and 3.97 (the analogy with UCTA)."

30. He concluded at paragraph 61:

"Where non-compliance with the adjudication provisions arises, that is to say non-compliance with section 108 of HGCRA, the position seems to me to be reasonably clear. The words of the section should be taken to mean what they say, namely that if the contract does not comply – in any respect – with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme apply. As we have already seen, the adjudication provisions in the Scheme are those contained in Part I. So if there is any non-compliance, the adjudication provisions in Part I of the Scheme are brought in – lock, stock and barrel."

31. I agree with this statement of the law. It is logical in that it follows the wording of Section 108(5) of the HGCRA and in that it provides a simple approach for adjudicators: if there is in the contract adjudication provisions at least one material non-compliance, they all go and the well known Scheme adjudication provisions are incorporated in their entirety. The statement is consistent with the previous English authorities, albeit obiter the Scottish courts suggest otherwise. Mr Mort for Camden relies on a dictum of Lord Justice May in Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd [2004] BLR 65 at Paragraph 3 of his judgment:

"In July 1993, the government appointed Sir Michael Latham to undertake a review of Procurement and Contractual Arrangements in the United Kingdom construction industry. One of the recommendations in his report was that legislation should provide for the speedy resolution of disputes, including disputes as to payment by adjudication, referee or expert. This recommendation resulted in Part II of the Housing Grants, Construction and Regeneration Act 1996. This provides that every written construction contract has to contain the right to refer disputes to adjudication under a procedure which complies with section 108. If the written construction contract itself contains provisions for such a right, those provisions will apply. If and to the extent that it does not, the adjudication provisions of the Scheme for Construction Contracts apply - see section 108(5). Section 114 provides for the minister to make a Scheme by regulations. Section 114(4) provides that where any provision of the Scheme applies by virtue of this part of the Act in default of contractual provisions agreed by the parties, they have effect as implied terms of the contract concerned."

This is at best obiter as the impact of Section 108(5) was not in issue in the proceedings let alone the appeal and it is unlikely that there was any argument about this issue.

32. The application of Section 107 was emphatically addressed in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland Ltd [2002] BLR 217, in which Lord Justice Ward with whom Lord Justice Robert Walker agreed decided that:

"19. On the point of construction of section 107, what has to be evidenced in writing is, literally, the agreement, which means all of it, not part of it. A record of the agreement also suggests a complete agreement, not a partial one. The only exception to the generality of that construction is the instance falling within sub-section 5 where the material or relevant parts alleged and not denied in the written submissions in the adjudication proceedings are sufficient. Unfortunately, I do not think sub-section 5 can so dominate the interpretation of the section as a whole so as to limit what needs to be evidenced in writing simply to the material terms raised in the arbitration. It must be remembered that by virtue of section 107(1) the need for an agreement in writing is the precondition for the application of the other provisions of Part II of the Act, not just the jurisdictional threshold for a reference to adjudication. I say "unfortunately" because, like Auld L.J. whose judgment I have now read in draft, I would regard it as a pity if too much "jurisdictional wrangling" were to limit the opportunities for expeditious adjudication having an interim effect only. No doubt adjudicators will be robust in excluding the trivial from the ambit of the agreement and the matter must be entrusted to their common sense. Here we have a comparatively simple oral agreement about the terms of which there may be very little, if any, dispute..."

33. Ward LJ also addressed the sub-sections on Section 107:

12. I turn to the construction of section 107. Section 107(1) limits the application of the Act to construction contracts which are in writing or to other agreements which are effective for the purposes of that part of the Act only if in writing. This must be seen against the background which led to the introduction of this change. In its origin it was an attempt to force the industry to submit to a standard form of contract. That did not succeed but writing is still important and writing is important because it provides certainty. Certainty is all the more important when adjudication is envisaged to have to take place under a demanding timetable. The adjudicator has to start with some certainty as to what the terms of the contract are.

13. Section 107(2) gives three categories where the agreement is to be treated in writing. The first is where the agreement, whether or not it is signed by the parties, is made in writing. That must mean where the agreement is contained in a written document which stands as a record of the agreement and all that was contained in the agreement. The second category, an exchange of communications in writing, likewise is capable of containing all that needs to be known about the agreement. One is therefore led to believe by what used to be known as the eiusdem generis rule that the third category will be to the same effect namely that the evidence in writing is evidence of the whole agreement.

14. Sub-section (3) is consistent with that view. Where the parties agree by reference to terms which are in writing, the legislature is envisaging that all of the material terms are in writing and that the oral agreement refers to that written record.

15. Sub-section (4) allows an agreement to be evidenced in writing if it (the agreement) is recorded by one of the parties or by a third party with the authority of the parties to the agreement. What is there contemplated is, thus, a record (which by sub-section (6) can be in writing or a record by any means) of everything which has been said. Again it is a record of the whole agreement.

16. Sub-section (5) is a specific provision. Where there has been an exchange of written submissions in the adjudication proceedings in which the existence of an agreement otherwise than in writing is alleged by one party and not denied by the other, then that exchange constitutes "an agreement in writing to the effect alleged". The last few words are important. The exchange constitutes an agreement in writing which does more than evidence the existence of the agreement. It also evidences the effect of the agreement alleged, and that must mean such terms which it may be material to allege for the purpose of that particular adjudication. It is not necessary for me to form a view about Grovedeck Ltd. v Capital Demolition Ltd. 2000 Building Law Reports 181. Dealing with section 107(5) His Hon. Judge Bowsher Q.C. said:-

"Disputes as to the terms, express and implied, of oral construction agreements are surprisingly common and are not readily susceptible of resolution by a summary procedure such as adjudication. It is not surprising that Parliament should have intended that such disputes should not be determined by adjudicators under the Act, ..." (Emphasis added by me).

I agree. That is why a record in writing is so essential. The written record of the agreement is the foundation from which a dispute may spring but the least the adjudicator has to be certain about is the terms of the agreement which is giving rise to the dispute.

34. Mr Justice Jackson (as he then was) with his customary succinctness stated in Trustees of the Stratfield Saye Estate v AHL Construction Ltd [2004] EWHC 3286 (TCC):

"47. The principle of law which I derive from the majority judgments in RJT is this: an agreement is only evidenced in writing for the purposes of section 107, subsections (2), (3) and (4), if all the express terms of that agreement are recorded in writing. It is not sufficient to show that all terms material to the issues under adjudication have been recorded in writing."

35. The Yuanda case also addressed the impact of the purpose of the HGCRA on a clause which imposed on the referring party to an adjudication always being responsible for its own, the adjudicator's and the other party's costs of the adjudication. In the result Mr Justice Edwards-Stuart decided that the clause did offend against the Act and was unenforceable. He confirmed at Paragraph 41 that the intention of Parliament "in enacting HGCRA was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis, and requiring the decisions of the adjudicator to be enforced, pending the final determination of disputes by arbitration, litigation or agreement". He found at Paragraph 43 that "it would be in express conflict with the requirement that the parties were to comply with the decisions of adjudicators". This does not directly apply to the current case but it is at least an illustration that one needs to consider the purpose of the Act when construing it.

Discussion

36. There are two issues of equal efficacy which the Court must address, the first being whether it has been established that all the terms of the construction contract between the parties were in writing for the purposes of Section 107 of the HGCRA. It does seem to be common ground, and rightly so, that there was a contract between the parties in relation to Phases A and B of what was originally the Ampthill Square Estate project and, if it was and all its terms were in writing, it would qualify as a construction contract under the HGCRA. It is necessary to analyse what the contractual position was. I preface my views on this issue with the observation that the simple facts that there have been oral discussions and indeed oral agreements between the parties does not necessarily mean that the eventual construction contract which emerges is not to be considered as having been in writing. This is because it will often be the case that a contract contained in or evidenced by written documents will have been preceded by oral discussions and agreements. It is really only if the agreement as ultimately entered into is entirely made orally or is made partly orally and partly in writing that it will run foul of the requirements for writing prescribed by Section 107 of the HGCRA.
37. In analysing the contractual position, and determining whether the Phase B contract was in writing for the purposes of Section 107 of the HGCRA, one must have regard to the evidence put before the Court. Essentially, Sprunt's largely unchallenged evidence is that the parties operated under the Framework Agreement until they entered into the Ampthill Estate agreement until June 2006 when, following a period of oral discussions, it sent the letter dated 12 June 2006 to Camden which was in effect accepted by conduct. On the other hand, Camden's evidence is inferential and proceeds upon the basis that there must or may have been agreements on terms as to the application of the Framework Agreement that the new relationship and various other matters. I am not impressed by the assertions made that Camden has had insufficient time to research the factual position, for two reasons: the issue was raised during the adjudication initiated over four months ago and a period of over two months has elapsed since the adjudicator's decision was issued. Secondly, there has been no application for an adjournment to enable further evidence to be collated. I would have expected Camden to have been able to identify what if any and whether terms had been agreed orally.
38. There is no doubt that the Framework Agreement was entirely in writing and that is common ground. Similarly, there is, rightly, no issue that the Ampthill Square Estate agreement was in writing, contained as it was by a written quotation incorporating extensive terms and specifications and a written letter of acceptance dated 15 July 2003. This was the background to the arrangements made between the parties to divide the projects which were the subject matter of that later agreement into phases. It is again, rightly common ground at that the latter agreement was not procured under the auspices of the Framework Agreement. There is no doubt that within a fairly short time the Ampthill Square Estate works had been divided into Phase A which was proceeding first and Phase B was to come second. Issues about fees had arisen on Phase A by 2005 and, amongst other things, oral discussions between the parties ranged over those issues as well as whether and if so on what terms Phase B should proceed.
39. There is no factual issue that the letter of 12 June 2006 was anything other than factually accurate in recording the extent and scope of those discussions. There is for instance no suggestion that its contents were ever challenged by Camden as inaccurate. It set out the additional fees claimed on Phase A and the projected total fees payable on Phase B. These latter fees were based on the Ampthill Square Estate agreement fee entitlement of 6.659% of the construction cost and certain alleged additional services already said to have been carried out. However, in relation to Phase B, Sprunt offered to abate what would have been the entitlement down to the fee level contained in what the letter called the Kentish Town Fee Agreement which, in context, must, I infer, relate to the Framework Agreement.
40. It is true to say that the offer in the letter of 12 June 2006 to abate the fees down to 5.5% is said to be "based on our discussions and agreement". Be that as it may, it is not now suggested that any binding agreement was reached orally before this letter and, indeed, that is confirmed by the offer being "subject to your written confirmation" and the offer being "subject to your agreement and confirmation that no further negative fee percentage adjustments… will be made to the 5.5% fee offered".
41. There is evidence, and no evidence against the proposition, that this letter was not responded to in writing but that it was effectively accepted by conduct in that both parties proceeded as if it had been accepted. Thus, the evidence that the Phase A claims were accepted and the early additional services and the 5.5% fee claims for Phase B were accepted and paid by Camden is unchallenged. There is the clearest evidence that the incorporation of or reversion to the Framework Agreement in relation to Phase B was agreed and accepted by both parties. That is confirmed not only in the Reply of Camden of 12 April 2010 to Sprunt's Claims for additional fees but also in Paragraph 28(3) of the Response of Camden in which Camden positively asserts that the Phase B contract was "made under the framework agreement". Thus there is within the adjudication proceedings "an assertion of the existence of an agreement otherwise than in writing", for the purposes of Section 107(5) of the HGCRA, assuming against Sprunt that the agreement in relation to Phase B was made at least in part otherwise than in writing. It was suggested that Section 107(5) could not apply to the adjudication proceedings which are the subject matter of the court enforcement proceedings. In my judgement, that suggestion is not borne out by the wording of the sub-section which can clearly apply to any adjudication proceedings.
42. In my judgement however, based on the evidence before the Court, the Phase B agreement was evidenced by or is to be treated as being in writing by reason of the letter of 12 June 2006. There clearly was an offer in the latter capable of acceptance, namely to proceed in relation to the Phase B works on the basis of a fee of 5.5% and on the basis of the Framework Agreement. Whilst it can not be said that there was an agreement made by exchange of communications in writing for the purposes of Section 107(2)(b), or that the agreement was "evidenced in writing" under Section 107(2)(c) because it was not recorded in writing with the authority of the parties as recognised in Section 107(4), it can be said that the parties made an agreement in writing because they agreed "otherwise than in writing by reference to terms which [were] in writing" for the purposes of Section 107(3). It is accepted law that an offer can be accepted by conduct. An example in a construction context might be the written tender or counter-offer which is accepted by the conduct of the tenderer in being allowed to start or in starting work. Within the context of Section 107(4), that conduct can be taken to refer to written terms, such as may have been set out in the tender or counter offer as the case may be. Similarly, if, contrary to my view that there was an express incorporation of the Framework Agreement in the letter of 12 June 2006, the parties orally agreed that the Framework Agreement was to apply, that would similarly fit within Section 107(4).
43. I conclude therefore that the agreement between the parties relating to Phase B is in writing within the meaning of Section 107 of the HGCRA.
44. I then move on to the second issue which relates in effect to whether the correct body nominated Mr Soudager for this adjudication. Camden argues that it was the nominating body and the RICS was not. There is acceptance by Camden, at least for the purposes of these proceedings, that Clause 25.11 of the Framework Agreement offends against Section 108(3) of the HGCRA. This was a proper concession because the clause clearly provides that the adjudicator's decision would not be binding in circumstances in which and while it is challenged in legal proceedings. There are authorities too numerous to mention that make it clear that the adjudicator's decisions are binding until they are resolved by legal or arbitration proceedings; thus, if the decision calls for payment by the responding party, say within 14 days, Clause 25.11 offends against that requirement. It follows that, based on the above analysis of the law on this topic, Section 108(5) of the HGCRA requires that all the adjudication provisions of the Scheme apply.
45. That then takes one to Paragraph 2 of Part 1 of the Schedule to the Scheme. This specifically makes a distinction between a "specified nominating body" and an "adjudicator nominating body". The former is clearly the nominating body specified in the contract between the parties and the latter is the body which nominates when there is no specified nominating body. This recognises the acceptability of parties deciding for themselves who should be the adjudicator (with names which can be specifically agreed in the contract) or who or what body should nominate the adjudicator. The use of the term "body" suggests that it would be an organisation, as opposed to an individual; this view is supported by the references in that paragraph 2(a)(1) to "person". However it is only in the words of Paragraph 2(3) that one sees that for the "adjudicator nominating body" neither a natural person nor a party to the dispute can fulfil that role. The distinction between the "specified nominating body" and the "adjudicator nominating body" is maintained in Paragraphs 5 and 6.
46. Given that the Scheme adjudication provisions apply by operation of Section 108(5), it can be argued that the Scheme itself gives priority to the contractually specified nominating body to nominate the adjudicator. However, the question arises as to whether this circular reversion by the Scheme back to what is specified in the contract is, so to speak, "trumped" by Section 108(5). On balance, I consider that it is because that is consistent with the overall statutory purpose of incorporating the Scheme as a whole when there are key non-compliances with Section 108. Put another way, one disregards the adjudication provisions agreed by the parties in these circumstances.
47. Even if that view is wrong, there is a stronger point which is that it is inherently unsound and contrary to the policy of the HGCRA for the contract to specify that one side should nominate the adjudicator. Section 108(2)(e) imposes a statutory requirement that the contract should impose a duty on the adjudicator to act impartially. Impartiality in an adjudicator, or indeed an arbitrator or judge, is judged in two ways, the first being by reference to actual partiality or bias and the other by reference to ostensible or apparent partiality or bias. There are very few cases, at the least reported, of actual partiality or bias and most cases fall into the ostensible or apparent category. That is judged by reference to an objective test as propounded in Porter v Magill [2002] 2 AC 357 which although not specifically quoted by the parties in argument was accepted by Counsel broadly as being whether a fair-minded and informed observer, having considered all the circumstances which have a bearing on the suggestion that the decision maker was biased would conclude that there was a real possibility that he was biased.
48. Of course, it would be perfectly possible for Camden, as the contractually specified organisation, to nominate a wholly independent person as adjudicator; for instance, it could nominate Leading Counsel who had never been instructed by Camden or solicitors working for Camden or a solicitor with a similar lack of connection. However, there is no obviously good reason why Camden retained to itself the right to nominate adjudicators other than to appoint someone who it believed might be sympathetic or not unsympathetic to its position even if wholly independent. Camden could nominate an adjudicator who was very expensive in relation to the amounts in issue; for instance if Sprunt had a claim for £10,000, it might be intimidated from going to adjudication if the senior solicitor adjudicator nominated by Camden charged, say £800 per hour. I do not imply any impropriety on the part of any person at Camden. However, it would be difficult to dispel the real possibility that Camden had appointed what it thought was a "horse for the course" and someone who was or might be sympathetic to Camden. In essence, Camden being a party to the construction contract in question lacks the necessary quality of independence in the nomination of an adjudicator.
49. An alternative view, as put forward by Counsel for Camden, was that it was not the fact that Camden was to nominate that would give rise to a lack of impartiality; that would only arise if Camden nominated someone in respect of whom there was actual or apparent partiality. That is not an unrespectable argument in that in some arbitration agreements, for instance those subject to the ICC Rules, each side will nominate an arbitrator, albeit that a chairman will then be nominated independently. However, arbitration is invariably a longer term process than a 28 or 42 day adjudication and there is limited time in which a party to adjudication can determine if an adjudicator nominated by the other party is or might be considered potentially, actually or ostensibly partial or biased. It might even be the case that such a nominated adjudicator does not know why he or she has been selected by the nominating party and he or she might well consider that there is no partiality or bias. The advantage of having a wholly independent institution or body to nominate is that it will have no interest in nominating any particular person in preference to another.
50. Essentially, what Camden would have is not a judge in its own cause but the right to nominate a judge in its own cause and that strikes against the policy of the act of having actually and ostensibly impartial adjudicators.
51. It follows that the contractual clause enabling Camden to nominate adjudicators is contrary to the HGCRA and in particular the statutory policy of having impartial adjudicators. In those circumstances there was no lawful "specified nominating authority" within the meaning of Paragraph 2(1)(b) of the Schedule to the Scheme. Therefore, the RICS was a valid nominating body and Mr Soudager was validly appointed.

Decision

52. In my judgment, there was a written construction contract here relating to Phase B and Mr Soudager was properly appointed by the RICS. He therefore had jurisdiction and his decision is enforceable. There will be judgement for the sums claimed in favour of Sprunt.