Practical Law

The parties in Harding (t/a MJ Harding Building Contractors) v Paice and Springall are fairly familiar to us now, as this is the third time we’ve seen a reported judgment arising out of the building contract that Harding entered into with Messrs Paice and Springall. This one is actually the first of the three, even though it is the last to be made available (on Westlaw). Given it addresses the question of whether the parties had successfully amended their contract to exclude adjudication, you can probably guess what conclusion Ramsey J came to.

Harding (t/a MJ Harding Building Contractors) v Paice and Springall

Matt wrote about the first reported judgment (where Edwards-Stuart J held that the fourth adjudicator was not asked to decide the same dispute as the third adjudicator had decided, so he refused to grant an injunction) and Richard Sage and I separately considered the second reported judgment (where Coulson J held that a telephone call to the fourth adjudicator’s office two months before the fourth adjudication gave rise to the possibility of bias). As there is an appeal listed for November from the first reported judgment, perhaps we will flip a coin to see who gets the next one!

A bit of background

It may help to provide a few details, so here’s a quick recap:

• The contractor (Harding) agreed to build two houses for two property developers (Messrs Paice and Springall). The parties entered into a JCT Intermediate Building Contract, 2011 Edition (IC 2011).
• Work started in April 2013.
• A dispute arose over the contractor’s interim application for payment 7. That dispute was referred to adjudication. The property developers argued that the section 106 residential occupier exception applied. Because there was no contractual mechanism to adjudicate (they alleged the IC 2011 contract had been amended to exclude adjudication), the adjudicator lacked jurisdiction.
• The first adjudicator’s decision dated 4 November 2013 awarded the contractor some £8,252. He found he had jurisdiction as the contract provided for adjudication and, in any event, section 106 did not apply.
• The contractor started another adjudication in relation to interim application for payment 8. The same adjudicator was appointed. The property developers raised the same jurisdictional arguments. Somewhat strangely, the contractor sought to revoke the second adjudicator’s appointment because, it claimed, he had exceeded his jurisdiction in the first adjudication. The adjudicator did not resign and the property developers refused to agree to the revocation, instead reserving their position and continuing with the adjudication.
• The second adjudicator’s decision dated 28 November 2013 awarded the contractor just under £250,000.
• Enforcement proceedings followed as both decisions remained outstanding.
• There was a short stay to see if the parties could resolve their differences (which they couldn’t), and then there was a hearing in April 2014 before Ramsey J.

Meanwhile, the contractor had given notice that it was suspending its works (under clause 8.9.2.2). (There had been a purported termination by the property developers in September 2013, which the contractor had rejected.) In January 2014, the contractor had given notice of termination of its employment (under clause 8.9.3).

Referring party seeks to revoke adjudicator’s appointment

Before turning to Ramsey J’s substantive judgment, there is one point that I should pick up on. In paragraphs 9-11 of the judgment there is reference to the contractor, who was also the referring party, asking the second adjudicator to resign during the second adjudication.

It seems that the contractor was of the view that the first adjudicator had exceeded his jurisdiction, which meant:

• The contractor was not bound by his decision and would refer the dispute to another adjudicator.
• The second adjudicator did not have jurisdiction to decide the dispute in the second adjudication. That dispute would also be referred to another adjudicator.

The adjudicator suggested his appointment could not be revoked unless both parties agreed, which the property developers refused to do. The adjudicator therefore continued with the referral.

This is not something that I’ve come across before. It seems quite different to the situation in Lanes v Galliford Try. When I first read it, I wondered if it might be linked to the phone call issue that was before Coulson J earlier this year (in the second reported judgment). However, the timing is all wrong for that (the revocation request was made in early November 2013, whereas the evidence about the phone call suggested it took place in August 2014).

Whatever prompted it, it doesn’t seem to be something that the contractor pursued.

Had the contract been amended and adjudication excluded?

The central issue that Ramsey J had to consider was whether the parties’ contract contained an express adjudication clause. This was important because it was arguable that the property developers would fall within the section 106 residential occupier exception otherwise. If they did, then the provisions of the Scheme for Construction Contracts 1998 would not be implied in the absence of an express provision.

The court carried out a detailed review of the amendments that the parties had attempted to make to their contract. For example:

• In the contract particulars, “n/a” had been inserted against the reference to clause 9.2.1 and article 7 had been deleted. The property developers argued that this meant clause 9.2 (in the contract conditions) did not apply because the parties had meant to delete the adjudication provisions.
• The contractor argued that clause 9.2 remained and applied on its own terms. Article 7 was not necessary to bring those provisions into effect.

Clause 9.2 is a self-standing adjudication provision

Ramsey J preferred the contractor’s argument, finding that clause 9.2 was a self-standing adjudication provision:

“Under the terms of this Contract, it is not strictly necessary to have an article in order to incorporate a provision in the conditions of the Contract if those conditions are incorporated in any case. Indeed, the provisions for mediation in Clause 9.1 do not have a parallel article to give effect to Clause 9.1. Therefore Clause 9.1 is a self-standing dispute resolution procedure which applies in this case and is not dependent on there being an article to bring it into effect. Equally, Clause 9.2, on a similar interpretation, does not need an article of agreement. The absence of Article 7 , in this case, does not therefore mean that Clause 9.2 does not have effect.”

This could be contrasted with the arbitration provisions in article 8 and clause 9, where both the article and the clauses were necessary because of the wording in clause 9, which began with the phrase, “Any arbitration pursuant to Article 8…”.

I have to say that when I first read paragraphs 19-26 of the judgment, I was pretty convinced that the parties hadn’t intended there to be any contractual provision for adjudication, and initially I was somewhat surprised by Ramsey J’s conclusion that they had. However, once I had read his clearly thought out reasoning, I could understand why he’d reached that conclusion.

Amending standard form contracts

Although this case does rather turn on its own facts, it is a useful lesson for contract drafters about how to take care when amending standard forms, particularly if you are attempting to exclude adjudication. As we all know, there is a statutory right to adjudicate that cannot be excluded, except if the residential occupier exception applies. On this occasion, Ramsey J did not need to consider that issue. It may not always be so clear cut.