Contract Formation

By Victoria Russell, Fenwick Elliott

RMP Construction Services Ltd v Chalcroft Ltd [2015] EWHC 3737 (TCC) (21 December 2015)

This was an adjudication enforcement case, where it was agreed that RMP had worked for Chalcroft pursuant to a construction contract, but there was disagreement over how that contract was formed. RMP alleged that it was formed by an email sent by Chalcroft on 5 December 2014, which had accepted RMP’s offer. Chalcroft argued a number of alternatives and said that if the contract was formed by, or included, a Letter of Intent dated 8 December 2014, or by, or included, a sub-contract order placed on 13 April 2015, the contract incorporated a Standard Form of JCT wording. They agreed that whatever contractual route applied, it was a construction contract for the purposes of the HGCRA 1996 and further agreed that the adjudication provisions of the Scheme applied. No adjudicator nominating body had been specified by the parties. Whichever the correct contractual analysis was, the procedure for appointing the adjudicator was the same, namely that laid down by the Scheme.

The issue over the correct contractual route was relevant as to whether or not the contractor had served a pay less notice in time. If the sub-contractor’s argument was correct, the pay less notice sent by the contractor was late, whereas if the contractor was correct, it was at least arguable that its pay less notice was valid and served in time.

The adjudicator accepted the sub-contractor’s analysis of the contract and made a non-binding decision to that effect. The adjudicator then decided that the Main Contractor, Chalcroft, should pay the sub-contractor just under £260,000 plus VAT.

In the enforcement proceedings, RMP said that once it was acknowledged that the adjudicator would have had jurisdiction and would have acquired jurisdiction by the same procedural route whichever contractual interpretation was correct, the fact that different contractual interpretations may have led to different substantive outcomes was irrelevant. In such circumstances, the adjudicator was validly appointed and if, which was disputed, he misinterpreted the substantive contractual provisions so as to come to an incorrect answer, then that was no bar to enforcement of his decision.

Mr Justice Stuart-Smith noted that the distinction between jurisdictional challenges to enforcement and challenges alleging substantive error should be approached in two different stages. The first question is whether or not the adjudicator had jurisdiction. The answer to that question here was that he did, on any contractual route being proposed by either party. He was to be appointed under the Scheme. Chalcroft’s only point on jurisdiction was that RMP had not properly identified the contract that gave rise to the Scheme route to jurisdiction.

Whilst the Judge noted that it may be “linguistically and even technically correct” to describe Chalcroft’s various alternative formulations as different contracts from the contract alleged by RMP, that difference should not be determinative when it was remembered that the court was concerned with one contracting process, with the only question being which party had correctly identified where in that process the relevant binding contract was formed. Where it was agreed that each of the alternatives was sufficient to found jurisdiction under the identical route of the Scheme, it seemed to the Judge that to rule RMP “out of court” because it may have misidentified the contractual provisions that would give the adjudicator jurisdiction under the Scheme was a “return to the formalistic obstacle course”.

The Judge noted that:

“The adjudication system was and is meant to provide quick and effective remedies to parties, equally accessible to those who are legally represented as to those who are not; and I bear in mind that the system now covers not only written contracts but also oral contracts which increases the likelihood that they may be mis-described”.

The Judge awarded RMP summary judgment. He decided that the adjudicator had had jurisdiction because, however the contractual arrangements between the parties were correctly to be described, they mandated the use of the Scheme and the adjudicator had been properly appointed by the Scheme’s procedure. The present case was to be treated as one where the adjudicator had jurisdiction to resolve the dispute that was referred to him, namely how much was owing to RMP under its interim application for payment, and address the correct question without bias, breach of natural justice or any other vice which would justify overturning his Decision. The Judge concluded that:

“If, which cannot be resolved now, he has made an error of law in referring to the wrong contractual provisions when deciding the substantive question that was referred to him, that falls within the category of errors of procedure, fact or law which the Court of Appeal has repeatedly emphasised should not prevent enforcement”.

Back to the previous page | Next article