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 Rolls Building London EC4A 1NL
		25/11/2014

Mrs Justice Carr :

Introduction

1. This is a Part 7 Claim brought to enforce the decision of an Adjudicator dated 23rd October 2013 ("the Decision") ("the Adjudicator"). The Claimant ("MCC") is a building contractor based in Kent. Mr Charles Crispin, also known as Sam Crispin ("Mr Crispin"), and his wife, Mrs Zhang Ya Yu, also known as Marcy Crispin ("Mrs Crispin"), (together "the Defendants"), are the residential occupiers of a property at 28 Lyndhurst Drive, Sevenoaks, Kent TN13 2 HQ ("the property"). By the Decision the Adjudicator determined that MCC was entitled to damages of £104,852.88 representing costs thrown away and lost profit as a result of the Defendants' cancellation of a building contract between the Defendants and MCC for works to the property.
2. If it is established the Adjudicator had jurisdiction to make the Decision, it is common ground that the Decision is enforceable. The Defendants challenge the Adjudicator's jurisdiction on the basis that no contract was ever formed between the parties, such that no adjudication agreement ever came into being between them and the Adjudicator had no jurisdiction to reach the Decision.
3. By s. 108(1) of the Housing Grants, Construction and Regeneration Act 1996 ("the Act") a party to a construction contract has the right to refer any dispute arising under the contract to adjudication. However, pursuant to s. 106(1) of the Act, the adjudication provisions in the Act do not apply "to a construction contract with a residential occupier".
4. It is therefore common ground that MCC must establish not only that it had a contract with the Defendants but that that contract incorporated an adjudication agreement. On the facts here, and as set out below, MCC contends that its contract with the Defendants was on the terms of the JCT Standard Form of Building Contract for a Home Owner/Occupier Who has appointed a Consultant to Oversee the Work, 2005 Edition, ("the JCT HOO"), which terms included an adjudication agreement.
5. As pleaded by MCC, the issue before the Court is whether or not the parties entered into such contract :

a) at a meeting on 9th August 2011; or

b) upon the Defendants' indication, by their provision of the keys to the property on 7^th September 2011, that they intended to be bound by the terms previously discussed, agreed and offered by MCC.

6. The following witnesses gave oral evidence for MCC :

a) Malcolm Scopes, the principal and sole shareholder of MCC;

b) Richard Elliott, the Defendants' appointed architect on the project;

c) Anthony Wright, MCC's foreman on the project.

7. Both Defendants gave oral evidence, as did Mr Michael Crispin, Mr Crispin's father ("Mr Crispin senior").

Summary of the relevant facts

8. Mr and Mrs Crispin married in about 2004. Mrs Crispin is a Chinese national, and they lived exclusively in China until recently. Mr Crispin has a diploma in surveying and is a chartered surveyor (MRICS). He is a past chairman of the British Chamber of Commerce in Shanghai. He has experience of negotiating property sale and purchase transactions. He is currently a director of PricewaterhouseCoopers.
9. Mr and Mrs Crispin have two children. They purchased the property in 2009 in preparation for their relocation to the UK which ultimately took place in about August 2013.
10. In 2010 they retained Open Architecture and Surveying Limited ("Open Architecture") to prepare plans for extensions and modifications to the property, to obtain planning permission, to prepare tender documents and to obtain tenders for the proposed works. It was the intention to appoint Richard Elliott ("Mr Elliott"), a senior architect with Open Architecture, as the consultant to administer the project, which in due course they duly did. The project involved the proposed construction of a two storey rear extension, single storey extensions on both sides, an attic conversion, a patio and driveway to the property. By the end of 2010 the Defendants had obtained planning permission.
11. On 24^th December 2010 Mr Elliott on behalf of the Defendants invited MCC to quote for the proposed works of alteration and addition. He had had previous positive experience of working with MCC.
12. On 27^th January 2011 MCC submitted its tender for the works in the sum of £518,739.25. The tender was the lowest of the three received by some substantial margin but it nevertheless exceeded the Defendants' budget. There thus followed a period of negotiation during which Mr Elliott and MCC carried out a value engineering process reducing the scope of the works so as to reduce their cost. More specifically, :

a) by email 15^th February 2011 Mr Elliott requested a PDF copy of the tender price and advised that the Defendants were keen to value engineer the project. Mr Crispin agreed in cross-examination that this was the obvious next step;

b) on 10^th March 2011 MCC provided Mr Elliott with an Excel version of its tender price;

c) a meeting took place on 7^th April 2011 between MCC and Mr Elliott to review costs reductions and value engineering proposals;

d) Mr Elliott made resulting proposals to the Defendants by email later that day, copying MCC in. Mr Elliott stated :

"Overall we feel we can alter the scheme to allow the build cost to be about £350,000….I feel that this could be the way forward. Prior to the contractor and myself developing the proposal could you confirm the alterations are acceptable";

e) on 18^th April 2011 the Defendants responded to the proposals, copying MCC in, and requested further costing information, raising detailed questions and observations;

f) on 16^th May 2011 Mr Elliott issued MCC with a sketch showing various savings and a revised schedule which MCC was asked to price;

g) on 7^th June 2011 MCC forwarded comments on the proposals to Mr Elliott;

h) on 24^th June 2011 the results of the cost reduction/value engineering exercise were submitted to the Defendants and a date arranged for a site visit. The Defendants wanted further savings. On 27^th June 2011 Mr Elliott advised that he would seek further savings in consultation with MCC. Mr Elliott expressly asked Mr Crispin for the "go ahead" on 27^th June 2011. If given, he would revise the drawings. Mr Crispin responded with the instruction : "Yes, please go ahead.";

i) on 14^th July 2011 a meeting took place attended by Mr Elliott, the Defendants and MCC. The purpose was to finalise changes to the project to enable Mr Elliott to revise his drawings so that MCC could price the revised scheme;

j) on 19^th July 2011 Mr Elliott issued to the Defendants revised GA drawings and the revised section ("the revised scheme"), stating that : "Hopefully the drawings indicate all the design changes as discussed". MCC was invited to price the revised scheme;

k) on 21^st July 2011 Mr Elliott instructed MCC to work to the revised scheme; they needed a baseline to work to. He emailed Mr Crispin, copied to Mr Scopes, as follows :

"Malcolm is looking at the costs, I have told him to use the current scheme. I know you may want the utility larger, but we need a baseline to work to."

13. On 27^th July 2011 MCC duly submitted an updated price based on the revised scheme to Mr Elliott who in turn sent it on to the Defendants on 28^th July 2011.
14. On or about 29^th July 2011 the Defendants met with Mr Elliott in the absence of MCC. On 1^st August 2011 Mr Elliott provided revised drawings to the Defendants and MCC, against which MCC produced a revised priced schedule on 3^rd August 2011 in the sum of £369,861. Mr Elliott forwarded the revised bid to the Defendants on the same day highlighting the price changes. MCC's revisions addressed all of the queries raised by Mr Crispin on 18^th April 2011.
15. On the same day Mr Elliott sent a blank copy of the proposed contract to the Defendants for their consideration. The proposed contract was the JCT HOO form described by Mr Elliott to Mr Crispin as "the proposed contract as agreed". Mr Crispin's evidence was that he read the document when he received it. He would have understood it when he did so.
16. A pre-contract meeting was arranged. It took place at 10am on 9^th August 2011 in the essentially empty kitchen of the property. Mr Scopes of MCC attended, as did Mr Elliott and both Defendants.
17. It is MCC's case that at this meeting the parties agreed a contract on the basis of the JCT HOO at a price of £369,861 with a commencement date of 9^th September 2011 and a contract period of 33 weeks. It is MCC's case that at the meeting Mr Elliott took the Defendants through the documents and drawings that would form the contract and that the parties reached agreement on the scope, price, time and payment mechanism for the project, all as recorded in the minutes of the meeting prepared by Mr Elliott ("the Minutes"). Mr Crispin agrees that certain matters identified in the Minutes were discussed, but both Defendants contend that nothing at all was agreed on this occasion.
18. The Minutes are very full and detailed. They include the following entries :

"PRE CONTRACT MINUTES No. 1

OPEN Architecture and Surveying Ltd

On 9^th August at 10.00 File Ref: 09071 8.5

…

1.1 Introductions Action

1.1.1 Appointments:

Client Mr S Crispin

Contractor Malcom Charles

Contract Administrator Richard Elliott

Structural Engineer Paul Considine

1.1.1.1 Project Description: ALL

Double storey rear and side addition to a 4 bed property.

External works to consist of a new patio and driveway.

1.2 Contract

1.2.1 Priorities, Preparation of Contract Documents

The contract documents are to consist of the following information

JCT Building Contract for a Home owner/occupier with Consultant.

Open Architecture's Drawings

Open Architecture's Preliminaries

Structural Engineer's Drawings

Contractors priced document

Contract to be based on the drawings 107 T3 and 109 T3, OA to issue an architect's instruction for the scheme to be based on the revised drawings 107 T4, 109 T4. Contractor to cost accordingly.

1.2.2 OA to prepare contract documents 3 copies to be signed. OA

…

1.2.5 Commencement Date:

9^th September 2011 CO

1.2.6 Completion Date:

33 weeks after commencement date (Excluding public holidays). ALL

Item

1.2.7 Contract Sum: ACTION

£369,861

1.2.8 Insurances:

Client to inform their Insurance company CL

Contractor to send a copy of his insurance to OA. Contractor

is insured UP TO £5 000 000 CO

1.2.9 Standards and Quality:

Standards are set out in the contract documents, final standards on

finishes etc by Contract Administrator. ALL

1.2.10 Pre-Ordering of Materials:

Only allowed with written consent from the Contract Administrator

1.2.11 Information outstanding:

Updated contract drawings to be issued. CO

Contractor to prepare an information release schedule.

(i.e. he is to look at what information is outstanding to enable

him to build the project)

1.2.12 Contract Intent

It is understood from these minutes that the Client Mr and Mrs

Crispin wish to enter into a contract with Malcolm Charles Ltd for

the alterations and additions to 28 Lyndhurst Drive, Sevenoaks, Kent.

These minutes are to be taken as a letter of intent with both parties.

All the particulars of the contract are set out in these minutes.

1.3 Contractors Matters

1.3.1 Date of Possession:

9^th September 2011. ALL

1.3.2 Master Programme:

Contractor to provide a programme prior to commencement of the contract. It is to consist of the information below

Contain adequate separate work elements to measure their progress and integration with services installations

Allocate specific dates for specialist sub-contract works, including supply of information, site operations, testing and commissioning

Accommodate public utilities, etc.

The Contractor must also provide for competent testing and commissioning of services as set out in the contract documents, and should be reminded that the time allocated for commissioning is not a contingency period for the main contract works.

…

1.3.6 Working Hours ALL

07.30 to 16.30 hrs Monday to Friday

…

19. 3.12 Samples :

Samples will be required Client to confirm, typically bricks, floor finishes, tiles, ironmongery. All samples will be emailed to the client prior to approval.

20. 4 Statutory Procedures…
21. 5 Health & Safety…
22. 6 Consultant's Matters…
23. 7 Cost Control and Certification…
24. 7.2

Ordering of materials :

Contractor only order from drawings and specifications

25. 7.3 Variations Procedures, Change Control: ALL

All alterations to the contract are to be via the Contract Administrator

with a written instruction. Any alterations that are carried out without

prior knowledge to the Contract Administrator are at the Contractors

risk.

…

26. 7.4 Valuation Procedures:

Contractor to be paid at 28 day intervals initial certificate to be issued

After 14 days of commencement of the contract, certificates to be issued on a monthly basis. Contract Administrator to monitor valuations with Contractor, with the use of the project programme, cash flow and works

Carried out on site.

…

27. 7.7 VAT:

This a vatable project…

28. 8 Communications and Procedures…
29. 9 Meetings
30. 9.1 Pattern and Procedures: ALL

6 no formal meetings will be held during the contract at every 4 weeks

Informal meetings will be held as and when required.

Initially there will be meetings every 2 weeks.

Informal meeting with the contractor and Architect on a weekly basis.

Client to provide details of his representative who will attend the

meetings.

…

31. 10 Any Other Business

1.10.1 Finalise of the design, Open to revised the scheme and issue amended drawings to all parties

1.10.2 Revised cost based on the revised scheme …"

32. Thus the Minutes covered, amongst other things, (in particular at section 1.2 and section 1.7)

a) the documents to form the contract and the scope of the works

b) the commencement and completion dates for the project;

c) the contract sum;

d) valuation procedures.

33. Mr Scopes' evidence was that at the end of the meeting the Defendants expressly stated that they wished to engage MCC for the works. Given the Defendants' imminent return to China, the parties agreed that the Minutes would stand as the contract between them. Mr Scopes' evidence was that he specifically asked the Defendants to confirm that they intended to form a contract then, and said in terms : "Is it OK now to spend money?" Mr Crispin agreed and they shook hands to mark the agreement. Mr Crispin agrees that he shook hands with Mr Scopes, but only as a "common courtesy", not a sign of any agreement.
34. Mr Elliott's evidence as to the meeting was that its purpose was to agree matters as far as possible. He drafted the Minutes, reflecting what was discussed and agreed at the meeting, using a standard template. They were an accurate record of what was discussed and agreed. He recalled asking in terms if the Defendants were happy for the Minutes when issued to stand as their letter of intent, to which they agreed. This was reflected in paragraph 1.2.12 of the Minutes which go on to record the particulars of contract being set out in the Minutes.
35. Mr Crispin's evidence was to the effect that whilst certain matters were discussed at the meeting, nothing was agreed. In particular, he accepted that a start date had been mentioned but only as a target. No date was agreed. He also accepted in terms that the contents of paragraph 5 of section 2 ("the mechanism for change") were discussed. That paragraph provides as follows :

"5. Changing the work details

Only the consultant can change the work details on the customer's behalf. Changes will be dealt with as follows :

a) if the changes increase the amount of work shown in the work details and the contractor agrees the changes, he will quote a price for the extra work and time involved. The customer will then decide whether to go ahead with the changes. If the customer agrees to the changes the consultant will instruct the contractor.

b) If the changes reduce the amount of work shown in the work details the contractor will make an appropriate reduction in the price.

c) If the changes alter the cost of any items in the work details without increasing or reducing the amount of work involved, an appropriate adjustment of the price will be made to reflect those changes."

36. Mr Crispin's evidence was that there was discussion of the scope of works and proposed changes to layout which would then result in a further reduction in price. He left the meeting with as many questions as answers. The Minutes do not give a fully accurate record of the state of discussions. The price was not finalised or agreed. Many revisions to the drawings were still outstanding and the start date was merely a target date most likely to be unachievable due to outstanding issues such as plans, party wall surveys and building insurance. Neither he nor his wife indicated in any way that they had reached a contractual agreement. He expected, wrongly as he now understands the position, that there would not be a binding contract unless or until there was a written contract signed by all parties. (For the avoidance of doubt, he never suggested that he ever expressly stipulated that there would have to be execution of a formal signed written contract before the parties were in any way bound.) Matters not agreed included price, scope, start date, contract period, payment terms and general conditions of contract.
37. Mrs Crispin's evidence also was to the effect that there was no agreement reached on 9^th August 2011. The price mentioned of £369,861 was still too high for her. More than 50% of the time at the meeting was taken up by her asking questions. There was a lot of discussion about the work and the layout. The scope of the works was not agreed.
38. By email dated 9^th August 2011, following the meeting, Mr Elliott forwarded to MCC final drawings with any alteration in cost to be dealt with under the issue of Architect's Instruction no. 1. These were the drawings referred to in minute 1.2.1 as being the construction drawings.
39. The Minutes were sent out on 11^th August 2011 by Mr Elliott to Mr Crispin and MCC, and other Open Architecture and building control personnel. As already indicated, the Defendants do not accept the Minutes as accurate, but it is to be noted that they did not take issue with them either on receipt or indeed at any material time. I do not accept that this was because they did not view the Minutes as being of any significance. They were, on any view, an important record.
40. On 12^th August 2011 Mr Elliott copied MCC in on emails with the Defendants dealing with the appointment of the party wall surveyor, Pierce Hill Project Services Limited, which the Defendants subsequently appointed formally on 21 August 2011 (although they had been seeking party wall advice for some time).
41. Mr Elliott issued the contract documents to the parties on 26^th August 2011, including a completed JCT HOO form. The form incorrectly stated that the price was VAT inclusive (see paragraph 1.7.7 of the Minutes). Mr Crispin picked up on this error in an email of 30^th August 2011. Mr Elliott duly sent out a corrected contract on 30^th August 2011.
42. On 30^th August 2011 MCC also contacted Mr Elliott and requested Part 2 of the contract – which Mr Elliott sent on the same day.
43. At Section A2 of Part 1 of the JCT HOO form the contract documents were listed (and also attached stamped "Contract Documents") with space for the parties to sign and date. The work details were stated to be contained in : MCC's quotation of 3^rd August 2011; Mr Elliott's drawings as listed on the drawing register and issue sheet; and Mr Elliott's specification.
44. On 6^th September 2011 Mr Crispin also queried whether payment was in full on completion (as the JCT HOO form also incorrectly stated) :

"Richard,

Another question about the contract, having spotted the VAT omission, payment is in full on completion is that correct?..."

45. Mr Elliott replied that day, copied to Mr Scopes, stating that that was incorrect. The payment terms were :

"..payment will be based on the contractor's valuations and by our certificates on a monthly basis. We will hold a retention of 5% on the scheme, 2.5% released on practical completion and the remainder at the end of practical completion.

Malcolm will be producing a cash flow forecast to help with the managing of funds…."

This is consistent with the Minutes at paragraph 1.7.5.

46. On the same day Mr Elliott emailed Mr Crispin, copied to Mr Scopes, asking :

"Who do we contact to arrange for Keys for Lyndhurst."

47. Mr Crispin responded, again copied to Mr Scopes, saying that he would arrange for his father to provide a set and asking when the keys would be needed. Mr Scopes responded to Mr Crispin and Mr Elliott on the question of timing that he could do with the keys as soon as possible as "we want to get in and measure etc".
48. On the same day Mr Crispin emailed MCC and Mr Elliott asking what date they were expecting to start work. Mr Scopes responded immediately as follows : "Monday 12^th as agreed". Separately Mr Elliott also confirmed on 6^th September 2011 that works would start on 12^th September 2011.
49. On 7^th September 2011 Mr Crispin senior provided Mr Wright, who was to be MCC's site foreman, with keys to the property at a "pre-start" meeting at the property. Mr Wright had been asked to manage the job by Mr Scopes in August 2011. He was asked by Mr Scopes to prepare a programme of works for the pre-start meeting with a start date of 9^th September 2011. He produced a handwritten draft programme on 5^th and 6^th September 2011. He was also asked to prepare an "information required" schedule, which he did.
50. At the meeting the draft programme was discussed. Mr Wright was also introduced to Mr Stuart Taylor, a local friend of the Defendants, who had been asked by the Defendants to carry out a supervisory role on the project for them. Mr Wright understood that there was to be a "soft" start on Friday 9^th September and a "hard" start on the following Monday. Mr Wright handed over MCC's liability insurance document to Mr Crispin senior. There was discussion about the boiler and water pressure tests. Mr Wright was advised that the Defendant's mortgage surveyor would be visiting on the Friday, as well as estate agents. Mr Crispin senior informed Mr Wright that the sale of the Defendant's home abroad had fallen though, with the result that the Defendants would now have to fund the works by way of mortgage. Mr Wright was asked to store materials and equipment in the garage so that the property did not look like a building site when the estate agents and surveyor attended the property on 9^th September 2011.
51. Mr Elliott sent an email out on 7^th September 2011 following the meeting to Mr Crispin, Mr Scopes and Mr Taylor, with notes following on what was described as the "pre-start" meeting. On 7^th September 2011 Mr Taylor also suggested to MCC by email that MCC place a protective covering be placed over the existing wood flooring. He also confirmed that he had "chatted with all relevant neighbours and no apparent serious issues…"
52. On Thursday 8^th September 2011 Mr Wright attended site to survey the structural steelwork and carry out an external level survey. This was not work that would have been carried out for pricing, or as Mr Wright put it, would not have been done if MCC "did not have the job". During the weekend of 9th/10th/11th September 2011 Mr Wright and others from MCC took delivery of plant and materials to the site in preparation to start work on Monday 12^th September 2011. They duly turned up for work on 12^th September 2011. Some temporary plumbing works were then carried out.
53. However, on Sunday 11^th September 2011 Mr Crispin had sent an email to MCC and Mr Elliott in the following terms :

"We are not ready to start work until we have a proper contract; there are details in there that are not yet finalised.

My building insurance is not in place for construction and there are still cost issues and details that haven't been finalised. It would not be right or fair for parties involved to start work until everything is in good order. Please do not start work on Monday."

54. MCC replied the same day :

"It's a bit late now to stop it! There will be abortive costs. Deliveries and contractors are all arriving tomorrow as agreed."

55. On 11^th September 2011 Mr Elliott also emailed Mr Crispin, not copied to MCC, answering certain points and concluding as follows :

"I can understand your concern, but the three things are in place for a contract. Contract value – this has been stated. Description of the works – as contract drawings. Time scale- 33 weeks. Could you confirm that Malcolm can start tomorrow."

56. Mr Scopes informed Mr Wright at about 10am on 12^th September 2011 that the project had been put on hold. Mr Elliott emailed the Defendants to say that he had instructed MCC to "pull off site and not to start". The Defendants also emailed Mr Elliott with a list of concerns including the following :

"During the summer we had a quote from another firm at 10% less with a superior job spec (incl extra roof work for the attic etc). We decided to stick with you. Both sides must work together to find a further 10% cost reduction on the total job price and get the dormer window over the stairs done. Your foundation work budget in particular looks very expensive."

Mr Elliott responded to those concerns by email on the same day.

57. On 12^th September 2011 Mr Crispin was advised by his insurers that underwriters were unable to insure the existing structure on the existing basis since the scope of the works extended the existing building structure. Thus, until insurance was in place, the Defendants were at risk in relation to building insurance. There were also further email exchanges between Mr Crispin and Mr Elliott seeking further savings.
58. On 12^th September 2011 Mr Crispin also commented in an email to Mr Crispin : "Need to backload the payment terms, our situation is more difficult than it was last week." Mr Crispin confirmed in evidence that the Defendants had not originally planned to fund the works by mortgage. The requirement for a mortgage arose when the sale of their property in China fell through. He agreed in cross-examination that "something" happened over the weekend of 11 and 12^th September that altered their financial position.
59. On 13^th September 2011 MCC offered a list of potential costs savings to the tune of £40,000. Mr Crispin also emailed Mr Elliott as follows :

"To be honest we really do not know what to do. We are so far away and actually scared to move forward with such a big project that we have no control over. I know Malcolm has put a lot of effort in and you have of course too but all those revised costings today have only undermined our confidence. We can only realistically put the project on hold while we regroup a bit. But we want to be reasonable about it. What would you do in our situation?"

60. On 14^th September 2011 MCC emailed Mr Elliott to confirm the Defendants' instruction not to proceed with the project for the time being. It indicated that it would now remove all the plant and equipment previously delivered to site.
61. On 23^rd September 2011 Mr Elliott emailed the Defendants to say that he had revised the construction drawings but not yet issued them to MCC.
62. On 5^th October 2011 MCC sought an update from the Defendants. Mr Crispin replied :

"The job could not go ahead as proposed, it had to stop. We haven't worked out exactly if/how to proceed. Please let me know what I owe you for the plumber."

63. MCC replied stating that its costs exceeded the cost of the plumber and that it would render an invoice for its costs of £3,648.95 excluding VAT. The Defendants did not make any payment in this regard. Mr Crispin indicated that he did not consider all the costs claimed his responsibility.
64. On 2^nd September 2012 agents for MCC wrote to the Defendants claiming payment for the aborted costs previously claimed and a further £60,000 or so for breach of contract. The Defendants did not make any payment.
65. The dispute was then referred to adjudication. The first adjudicator concluded that he had no jurisdiction to act (for reasons unspecified). The (second) adjudicator in a first ruling ruled that on 9^th August 2011 the parties had concluded a contract under terms of the JCT HOO form. Thereafter, on 23^rd October 2013 he made the Decision.
66. The present proceedings were commenced on 18^th July 2014. An application for summary judgment dated 10^th July 2014 was made by MCC but was with-drawn subsequently and the matter has proceeded by way of full trial.

The Law

67. The law can be stated un-controversially. Chitty on Contracts (31^st Ed) ("Chitty") at paragraph 2-001 puts it thus :

"…the first requirement for the formation of a contract is that the parties should have reached agreement. Generally speaking, agreement is reached when an offer made by one of the parties…is accepted by the other… Such an agreement may, however, lack contractual force because it is incomplete, because its terms are not sufficiently certain, because its operation is subject to a condition which fails to occur or because it was made without any intention to create legal relations. An agreement may also lack contractual force on the ground of want of consideration…"

68. In deciding whether the parties have reached agreement, the courts apply an objective test : have the parties to all outward appearances agreed on the same terms on the same subject-matter ? In RTS v Molkerei Alois [2010] BLR 337 the Supreme Court stated :

"The Principles

45. The general principles are not in doubt. Whether there is a binding contract between the parties and if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement."

69. In ERDC Group Ltd v Brunel University [2006] BLR 255, HHJ Humphrey Lloyd QC decided (at page 265) that :

"…It may be trite to say that contracts for construction work generally require agreement on the scope of the work or services to be undertaken (although framework or term contracts with only indicia as to the work to be done are valid), on the price or rates or other mechanism for determining what is to be paid (although in the absence of such agreement some term will usually be implied), on the method by and time within which payment is to be made (although here again, quite apart from statute, such as the Housing Grants etc. Act 1996, the common law may imply terms), on the time within which the work or services are to be performed (although a reasonable time will be implied if there is no agreement)…".

...See also Glendalough Associated SA v Harris Canlan Construction Col Ltd (2013) EWHC 3142, [2014] 1 WLR 1751, per Edwards-Stuart J at paragraph 60.)

70. Where parties carry on lengthy negotiations, the court must look at the whole correspondence and decide whether, on its true construction, the parties had agreed to the same terms - see Chitty at paragraph 2-028 and Keating on Construction Contracts (9^th Ed) at paragraph 2-018.
71. There may be circumstances where the parties make it clear that, although they have agreed all the terms necessary for the making of a binding agreement, they do not intend their agreement to become binding until they have gone one step further, and embodied it in a formal document (see generally Chitty at paragraph 2-116 and, for example Stent Foundation Ltd v Carillion Construction [1999] 78 Con LR 188 at 196). However, as already indicated, it is no part of the Defendants' (pleaded or evidential) case that they ever adopted such a position, let alone made it clear. For example, at no stage did they use the phrase "subject to contract", a phrase with which Mr Crispin was at all material times well familiar.
72. Acceptance of an offer can of course be made by conduct. But conduct will amount to acceptance only if it is clear that the offeree did the act of alleged acceptance with the intention (ascertained in accordance with the objective principle) of accepting the offer – see Chitty at paragraph 2-030.
73. Despite the fact that the test is a purely objective one, the Defendants in particular have not refrained from deposing to their subjective beliefs, opinions and intentions^[1] at the time of their discussions and communications with MCC. I make it clear that in reaching the conclusions that I do below, I disregard those matters as irrelevant and apply faithfully the objective test. What matters is what crossed the line between the parties.

The Issues

74. As set out above, MCC contends, as pleaded in the Particulars of Claim, :

a) that the terms of the contract are set out in the Minutes, the documents referred to in the Minutes, including the JCT HOO standard form, the revised drawings issued on 9^th August 2011 and the JCT HOO form completed and issued by Mr Elliott on 30^th August 2011;

b) that the contract became binding on both parties when either :

"5.1 After the completed JCT Standard Form had been issued to them on 30th August 2011, the Defendants provided the Claimant with keys to the property to enable to the works to start on 9th September 2011 and thereby the Defendants evinced an intention to be bound by the terms of the Contract; or

5.2 Alternatively at the said meeting between the parties on 9 August 2011 when all of the essential elements of the Contract were agreed with access being provided to the property by the Defendants as described in paragraph 5.1 above."

75. It is common ground that paragraph 2 of Article K of the JCT HOO form provided :

"The customer or the contractor can have disputes decided within 21 days by an adjudicator appointed under an adjudication scheme for this contract. The adjudication scheme is run the Royal Institute of Chartered Surveyors (RICS), the Royal Institute of British Architects (RIBA) or the National Specialist Contractors Council (NSCC). This is as well as the right to go to court."

76. By paragraph 4, the cost, rules and procedures involved in adjudication would become part of the contract in the event that either party chose adjudication to decide disputes. Paragraph 22 of the relevant Adjudication Rules provided the parties were obliged to follow an adjudicator's decision unless and until either party obtains a court judgment different to that of the adjudicator.
77. The Defendants, on the other hand, say that the factual evidence is clear that no contract was entered into on 9^th August 2011 or at any later stage. Reliance is placed on paragraph 1.2.12 of the Minutes where it is stated that the Minutes are only to stand as a letter of intent, on the fact that it is alleged that central elements of the contract were never agreed, as evidenced by correspondence on 11^th September 2011 and following, in particular by the production by the Claimant of 3 prices based on drawings produced after the meeting on 9^th August 2011 indicating further reductions. A start date could not be agreed on 9^th August 2011 because necessary party wall consents had not been obtained by that date. The handing over of keys did not evince an intention on the part of the Defendants to be bound by the terms of any contract; they were provided in response to a request by MCC to "get in and measure etc".

Findings

78. It is appropriate in the first instance to make broad findings on the credibility of the witnesses :

a) Mr Scopes was a compelling and impressive witness. He had a commanding grasp of the facts with a clear and vivid recollection. He made fair and reasonable concessions when appropriate. In short, I found his evidence to be reliable;

b) Mr Elliott was clearly a reluctant witness, in the sense that he was conscious of his position as the Defendants' previous agent now giving evidence for MCC. But he gave his evidence in a straightforward manner. I reject outright the suggestion made for the Defendants that he was exaggerating, let alone lying, to assist MCC because of some personal friendship or professional closeness to MCC;

c) Mr Wright was a careful witness, and obviously a highly experienced site manager;

d) Mr Crispin is a sophisticated professional, as his credentials testify. I found him to be a cautious and sometimes awkward witness. His awareness of the obstacles in his case led his evidence to be less than satisfactory on certain issues, for example :

i) in his assertion in cross-examination that he was unaware as at 9^th August 2011 of the time required for party wall consents to be secured. This was part of his contention that no start date was (or could be) agreed at the meeting. When taken to paragraph 39 of his witness statement, however, he had to accept that there he had stated that he was aware of relevant time frames for party wall consents by the time of the meeting;

ii) in his suggestion that he understood the email request from Mr Elliott for keys on 6^th September 2011 to be a request only for keys for Mr Elliott (and not MCC);

iii) in his assertion that Mr Elliott's email of 3rd August 2011 sending out the JCT HOO form agreement "as agreed" did not reflect the fact that Mr Crispin had agreed that this was the standard form agreement to be used;

iv) in his assertion that Mr Taylor went round to neighbours (at his request) without being armed with a work commencement date to share with them. This seems inherently implausible;

e) Mrs Crispin is also sophisticated and sharp, and described herself as a businesswoman in China. Chinese/Mandarin is her first language. As at 2011 her command of English was very limited. I was able to gauge her linguistic ability in the witness box; she said her English was obviously better now than it was in 2011. Her understanding of English has improved in the last 2 years to a position where she can now understand 50 – 60% of everyday conversations. I find that, whilst she was clearly directly involved and concerned with the project details, she was content to leave the negotiations and communications in English for her husband to handle on their joint behalf. As she said, it was "better" for Mr Crispin to speak for both of them. Her modus operandi was, quite understandably, to discuss matters with Mr Crispin in private and for him then to act on their joint plans. Consistent with that, there is only one email direct from her to Mr Elliott or MCC during the relevant period. I deal with her involvement in the events of the meeting of 9^th August 2011 in more detail below. But in so far as the parties were discussing technicalities and legalities in English and in so far as she was listening at the time at that meeting, I am confident that she would not have understood the vast majority of the discussions (unless translated for her by Mr Crispin). She fairly accepts that she did not understand everything that was discussed due to her difficulty in following the conversation, "with people often talking very fast and using technical language";

f) Mr Crispin senior was not cross-examined. His role was limited to attending the pre-start meeting on 7^th September 2011. He had no authority to deal on behalf of the Defendants, apart from handing over the keys. He could not remember "every detail" of the meeting and had no direct involvement in the project beyond this.

79. I turn then to the events of 9^th August 2011 and the accuracy of the Minutes.
80. I find that the minutes are accurate (subject to obvious or immaterial errors such as the property address) in recording the particulars of contract expressly discussed between the parties. I accept Mr Elliott's evidence that he took a careful note of what was agreed because "in his experience some residential clients forget what they have agreed or change their minds." Indeed, his evidence in this regard was not challenged. He thought it was particularly important to take a note in this case because the Defendants were asking to tweak the pricing and scope of the works. Given that the Minutes were prepared by Mr Elliott, the Defendants' agent, they cannot be said to be self-serving so far as MCC is concerned. It would be remarkable if the Minutes were simply the product of Mr Elliott's imagination. And as already indicated, the Defendants did not object to their content at any material stage, despite being sent them within days of the meeting. Even on Mr Crispin's own case as to the events of the meeting, I do not accept that he would have ignored material errors in the Minutes, for example as to price, JCT HOO form, start date and contract period. That would be inconsistent with his approach to detail both before and after 9^th August 2011.
81. It is essentially common ground that many of the central matters recorded in the Minutes were discussed. The debate is whether or not those matters were agreed. I find that they were.
82. I accept Mr Scopes' evidence that Mr Crispin, for himself and his wife, gave express agreement to the particulars recorded and shook his hand at the end to mark the agreement. I accept Mr Scopes' evidence at paragraphs 34 and 35 of his witness statement :

"34. As the minutes of the meeting make clear, Mr and Mrs Crispin were very keen to get started but at the date of the meeting, formal documents had not been prepared and were unlikely to be so before Mr and Mrs Crispin left to return to China. Because of this it was agreed that the minutes of the meeting were to be taken as the contract pending the completion and signing of the formal documents…Minute 1.2.12 of the meeting states :

"It is understood from these minutes that the Client Mr and Mrs Crispin with to enter into a contract with [MCC] for the alterations and additions to [the property]. These minutes are to be taken as a letter of intent with both parties. All particulars of the contract are set out in these minutes."

"35…It is not possible to start on site without having placed orders or organised materials, sub-contractors or labour…I specifically asked at the end of the meeting for the minutes to be taken as their intent, based on these agreed terms to form a contract now and specifically asked whether we were ok to place orders. My exact words were "Is it ok now to spend money?" Mr Crispin agreed and we shook hands on that basis…"

83. In cross-examination Mr Scopes said that he remembered his exact words as quoted above : it was something he often said. He had to be in a position to walk away and spend money. I accept this evidence as honest and reliable. Mr Crispin did not deny this exchange outright; rather he said that he did not remember it.
84. It follows that I prefer the evidence of Mr Scopes and Mr Elliott to that of Mr Crispin as to the events of the meeting of 9^th August 2011. As for Mrs Crispin, I find that her focus at the meeting was on the plans. Whilst she may have asked some questions, I do not accept that half or more of the meeting was taken up by her questioning Mr Scopes (or Mr Elliott). She allowed Mr Crispin to speak for both of them in English on the matters recorded in the Minutes. On her own evidence she did not hear any discussion about the start date (a phrase that she said she would have understood without translation), which Mr Crispin agrees was in fact discussed (even if only as a target date). This demonstrates well that her concentration was on the plans, and not the discussions. I cannot accept her firm evidence that "no-one talked about any item of contract": it is unsustainable when set against the Minutes. And whatever may have been in her mind (or heart) at the time, she agreed that she did not say in terms at any stage during the meeting that she did not want a contract.
85. Mr Scopes' recollection in particular is supported by the following facts and matters :

a) the Defendants had by this stage been working with Mr Elliott on the project since 2010 and in negotiation with MCC (directly or indirectly) for some six months. Mr Elliott had throughout proceeded to the next stage with MCC only after the Defendants' had given their confirmation and agreement to such progress. Mr Crispin agreed in evidence that he understood this to be Mr Elliott's modus operandi. To the Defendants' knowledge MCC had spent a very considerable amount of time and energy in the value engineering exercise and in producing a revised bid;

b) the Defendants were shortly to return to China. It is highly likely that they wanted to achieve real progress (and the start of works) before they did so. Agreement as alleged by MCC on 9^th August 2011 was the logical next step;

c) following the all-party meeting on 14^th July 2011 the Defendants had accepted the revised scheme as a baseline (whether that was the precise terminology that they would have used at the time or not). As at 9th August 2011 MCC had done everything required of it to comply with the revised scheme. The scope of the works was agreed, subject always to the mechanism for change. The Defendants' case has proceeded throughout on the false premise that any change meant that no contract was (or could be) agreed previously. But, as Mr Elliott put it, drawings on a project are only finalised when a scheme is complete; change in a contract is no way inconsistent with the existence of a contract;

d) it is particularly important to note in this context that, as even Mr Crispin agreed, the mechanism for change in the JCT HOO contract was expressly discussed and, on my findings, agreed. Thus the fact that not everything had been finalised was in no way a bar to the creation of a binding contract. For the avoidance of doubt, I accept Mr Scopes' evidence that Mr Elliott explained to the Defendants at the meeting that the figure of £369,861 was a baseline to work from and that any adjustments were to be made by way of Architect's Instructions. This was of course exactly the figure in MCC's re-pricing documents sent to the Defendants on 3^rd August 2011;

e) the existence of a budget of £300,000 (which Mrs Crispin said Mr Elliott had told them they would need) was again for this reason no bar to the agreement of a baseline price. It was also a figure given pre-tender, months before the meeting of 9^th August 2011. It was also in any event not so far removed from the figure of some £370,000 as to be totally inconsistent with it;

f) the Defendants were in a position on 9^th August 2011 to agree to a start date. In so far as party wall consents were a consideration, Mr Crispin's evidence was that he had obtained expert advice on the topic by the date of the meeting, namely that it would take several weeks to obtain party wall consent. It is unlikely in my judgment that the issue of party wall consent (or, for example, building insurance) would have prevented the Defendants from agreeing a start date of 9^th September 2011;

g) I am satisfied that, in addition to a start date, the contract period was also agreed as documented in the Minutes. The subsequent email from Mr Elliott to Mr Scopes requesting confirmation of the contract period was in the context of the revised drawings issued post-meeting on 9^th August 2011, as Mr Elliott confirmed;

h) Mr Elliott's evidence confirms that there was not just discussion but also agreement on the basis of the particulars recorded in the Minutes. In his words, "we set out the conditions in the Minutes that everyone agreed to".

86. The reference in the Minutes to being taken as a letter of intent is in no way inconsistent with this conclusion, for the reasons given by Mr Scopes in paragraphs 34 and 35 of his witness statement, as set out above. Nor is the title "pre-contract minutes" inconsistent. The meeting was pre-contract. That (or the title adopted by Mr Elliott^[2]) did not prevent the particulars recorded being agreed (or a contract arising during or at the end of the meeting). It is to be noted that the next meeting (on 7^th September 2011) was of course not described as "pre-contract" but rather "pre-start" which suggests the existence of a contract by then.
87. In summary, objectively construed, I find it more likely than not that by their words and conduct the parties did reach a binding agreement on the essential terms of a contract on 9^th August 2011, including as to scope, commencement and completion, contract sum, payment mechanism, the mechanism for change, valuation procedures and on the terms of the JCT HOO form, all as evidenced by the Minutes.
88. I turn to consider the position if I am wrong in this primary conclusion. In that event, I would find in the alternative that a binding agreement on JCT HOO terms was concluded upon the handing over of keys to MCC on 7^th September 2011.
89. By this stage, as already indicated the parties had been working together on the project post-tender for months. The meeting of 9^th August 2011 had taken place. Thereafter the following material developments had ensued :

a) on 11^th August 2011 the Minutes had been distributed to the parties. No-one had taken issue with their accuracy;

b) to MCC's knowledge, the Defendants had appointed a party wall surveyor (later the same month);

c) on 26^th August 2011 Mr Elliott had issued the contract drawings, including the JCT HOO form completed. Errors in the documentation (as to VAT and payment terms) had been clarified as set out above (on 30^th August and 6^th September 2011);

d) to MCC's knowledge, Mr Elliott had asked Mr Crispin for keys to the property for them. MCC had indicated that it wanted the keys as soon as possible to get in and measure;

e) both MCC and Mr Elliott had confirmed to the Defendants that the works would start (properly) on Monday 12^th September;

f) the meeting on 7^th September was set up as a "pre-start" meeting;

g) the Defendants had asked Mr Stuart Taylor to represent their interests in monitoring the project and to attend the meeting on 7^th September 2011 to introduce himself (and to visit neighbours, on my findings, to inform them of the imminent start of works at the property);

h) Mr Crispin senior attended the meeting on 7^th September 2011 and handed the keys over to Mr Wright, who had full access to the property from that time.

90. Applying the objective principle, against this background, the handing over of the keys by the Defendants (through Mr Crispin senior) to Mr Wright evinced an intention on the part of the Defendants to be bound contractually. The request for keys on 6^th September 2011 to Mr Crispin was unequivocal : in the words of Mr Elliott :

"Sam,

Who do we contact to arrange for Keys for Lyndhurst."

91. The reference by MCC to wanting to "get in and measure etc" was only made as the explanation for MCC wanting the keys "asap". Far from undermining my conclusion on acceptance, it supports it. The keys were wanted in advance of the agreed start date. It was objectively clear in any event that MCC was able fully to price and tender and agree all material contractual terms without having keys to go in and measure.
92. In summary, on any reasonable objective view, on this alternative case, the Defendants participated in a meeting chaired by their appointed consultant, worked through a whole series of detailed technical and legal points (even if on this alternative hypothesis there was no binding agreement at the meeting), culminating in an issued contract, date of possession and hand over of keys. A contract was concluded and on terms of the JCT HOO form, as evidenced by the Minutes and the contract documents issued on 26^th August 2011 themselves.
93. Subsequent correspondence, including later pricings, is in my judgment nothing to the point on either the Claimant's primary or alternative case. Ignoring the question of the relevance of subsequent conduct, by this stage the Defendants had indicated that they were not happy for the works to proceed. The email of 11^th September 2011 from Mr Elliott recording his understanding that a contract was in place, if anything, supports MCC's case. As for revised pricings, Mr Elliott and MCC were trying to accommodate the Defendants. These concessions did not reflect the absence of a binding contract, or a contractual entitlement to insist on one, but rather a businesslike attempt to address the position which had unfolded. Nor is there any significance in the fact that on 2^nd December 2011 Mr Scopes requested Mr Elliott to issue a formal valuation so that he could take steps to recover his abortive costs, a request to which Mr Elliott never responded.
94. Looking objectively at the parties' conduct and communications as a whole, and bearing in mind the findings of fact that I have made, a concluded agreement on the form of JCT HOO was reached on 9^th August 2011, alternatively on 7^th September 2011. I am confident that, had the Defendants' personal financial position not changed on or about 11^th/12^th September 2011, as it clearly had (see Mr Crispin's email of 12^th September 2011 to this effect), the Defendants would not have resiled from the contract that they had with MCC.

Conclusion

95. For the reasons set out above, judging the circumstances objectively, the Claimant has established the existence of a binding contract on the terms of the JCT HOO (and an adjudication agreement). That contract came into existence on 9^th August 2011, alternatively on 7^th September 2011.
96. Accordingly, the Adjudicator had jurisdiction to make the Decision which therefore falls to be enforced.

Note 1   Mr Elliott was cross-examined for the Defendants as to when he thought a contract was in place. He appeared to be of the view that a contract was in place but not on JCT HOO terms, because the written contract had not yet been signed. His subjective view, let alone his view of the legal position, is irrelevant to my determination.    [Back]

Note 2   In fact Mr Elliott under cross-examination agreed that he could have called the document “contract minutes”.     [Back]