Recently I wrote about “in writing” and how adjudicators deal with the issue of “is there a construction contract?”.
Shortly after that blog was posted, I was appointed in a dispute where the responding party challenged my jurisdiction, arguing that there was no construction contract as there was nothing in writing. The referring party denied this, arguing that the contract was “evidenced in writing” because there was a file note that set out the terms of the alleged agreement.
Section 107(4), Construction Act 1996
The referring party’s case hung on the wording of section 107(4) of the Construction Act 1996, which provides that:
“an agreement is evidenced in writing if an agreement made otherwise that in writing is recorded by one of the parties, or by a third party, with the authority of the parties to the agreement.”
At first glance, it seemed a simple issue to deal with:
- Was there a file note? Yes.
- Had it been made by one of the parties, or a third party? Yes, the referring party’s director had prepared the note.
- Did the file note record the terms of the parties’ agreement? Yes. (For the moment, I am ignoring the issue of whether it recorded all the terms of the alleged agreement.)
- Was the file note made with the authority of the parties? Well…
It was the authority point where the referring party came unstuck.
With the authority of the parties
We have all been to meetings where people take notes. Sometimes the notes are an almost verbatim account of the discussions, other times they may be scrawled bullets or action points. What happens to those notes after the meeting usually depends as much on the individual who made them, as on the nature of the meeting. At one extreme, there are those who get the notes typed up and placed on a file and, at the other end of the spectrum, the handwritten notes languish in a notebook, or on a scrap of paper somewhere, often never looked at again.
People can’t help but make notes, but how often do they actually agree on what will happen to those notes afterwards? Or decide that one party will be responsible for preparing a note, that they will all agree accurately records events at the meeting? And even if they do, what happens to the note once it is made?
In my case, the file note had been typed up by the referring party but there was no evidence that it had been sent to the responding party, or even that the responding party had agreed that the referring party’s director would prepare the note. It seemed to me that the referring party’s case failed at the first hurdle; there was no “authority” for the director to make the note. The responding party was not willing to agree to an ad-hoc adjudication and so I had no alternative but to resign.
In reaching my decision to resign, I was in part persuaded by the referring party’s failure to circulate the note for agreement. While not strictly necessary to fall within the definition of “with the authority of the parties”, it does suggest a lack of agreement, a lack of authority.
I was also able to rely on Judge Gilliland QC’s judgment in Millers Specialist Joinery Co Ltd v Nobles Construction Ltd (unreported) 3 August 2001, where one party wrote to the other side to confirm what it thought had been agreed but the judge found that this was not enough to satisfy section 107(4). The judge said that the letter merely recorded what one party thought had been agreed. The judge also noted that the other side had written a similar letter and this demonstrated that there was no authority. (Judge Gilliland QC went on to hold that the exchange of letters satisfied the agreement in writing test in section 107(2)(b) of the Construction Act 1996.)
If (or when) the LDEDC Act 2009 comes into force, such arguments will become a thing of the past. In the meantime, parties need to be aware of the exact nature of section 107.