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Oral construction contracts and parties who represent themselves

I’m not sure that parties who represent themselves and issues about an oral sub-contract (or three) are necessarily good bedfellows, as Coulson J recently found out when he had to deal with a challenge to the adjudicator’s decision in RCS Contractors Ltd v Conway.

It’s a short judgment (only 22 paragraphs), but it is a case that demonstrates some of the difficulties that can arise in adjudication.

RSC Contractors Ltd v Conway

RSC carried out groundworks for Mr Conway as a sub-contractor at three sites, which weren’t exactly near one another. One was in Notting Hill, London, one was in Pewsey, Wiltshire (which is near Swindon) and one was in Sutton, Surrey (about half way between Epsom and Croydon). That’s a fair geographical spread of the south.

At the final account stage, a dispute arose between the parties, which was referred to adjudication. During the adjudication, Mr Conway argued that there were three separate oral sub-contracts and that, in consequence, the adjudicator did not have the necessary jurisdiction to deal with RCS’ final account dispute.

The adjudicator rejected this challenge and, in November 2015, awarded RSC just under £60,000. That sum went unpaid and the enforcement proceedings ultimately ended up before Coulson J earlier this month. As he noted in his judgment, “for reasons which are unexplained”, it took nearly a year for the hearing to take place.

One sub-contract or three sub-contracts?

The nub of the case before Coulson J was whether there was one sub-contract or three sub-contracts. It seems a simple issue:

  • One sub-contract covering all three sites meant one final account dispute, which gave the adjudicator the necessary jurisdiction.
  • Three separate sub-contracts meant three different disputes, since there would be three final accounts, and the adjudicator would not have jurisdiction to deal with the one dispute referred.

It seems there wasn’t much in the way of documentary evidence and the court relied mainly on two witnesses, Mr O’Rourke for RSC and Mr Conway. As you might expect, Mr O’Rourke said that RCS had agreed with Mr Conway to:

“… complete all three of those projects as a single package albeit that the works would need to be broken down to show the cost allocation between the projects.”

However, there was to be one global final account.

Mr Conway’s evidence was that:

“… each of the three contracts Walmar Road, Pewsey Wiltshire, and Ridge Road has three different price, variations, scope, specification, agreed through different process, has different duration, performed at different times and for value, payment was applied for differently, they were paid for differently. Even the final applications were separately made and assessed. Payment Notices were issued separately. Although a summary sheet to show the total entitlement was created purely for convenience.”

Coulson J preferred Mr O’Rourke’s evidence, describing him as “honest and credible”. In contrast, he did not think Mr Conway was “an entirely satisfactory witness”. Reading between the lines, it seems some of the reasoning for this was the fact that Mr Conway was representing himself. Even though the court had “endeavoured to make every allowance for [his] difficulties as a litigant in person”, it struggled with the way that Mr Conway used the terms “sites” and “contracts” interchangeably and that:

“He raised matters which were irrelevant, and ran arguments which were not open to him. He repeatedly referred to documents which had not been provided. Most important of all, he had no positive case about the conversation on which Mr O’Rourke relied so heavily, that of 19 December 2012. Indeed, he seemed unable to recall that conversation at all.”

This led Coulson J to state that:

“Mr Conway’s case amounted to no more than the assertion that, because there were three separate sites, and three separate bills of quantity and other valuation documents, there must have been three separate contracts.”

It isn’t clear whether, if Mr Conway had been represented in the enforcement proceedings, his case would have been presented differently and it wouldn’t be fair (or possible?) to speculate on what would have happened, if he had been. However, Mr Conway was receiving legal advice during the adjudication, as the adjudicator noted in his non-binding decision on jurisdiction. This is most likely where the idea to run the one sub-contract/three sub-contracts argument came from (it formed the basis of the original jurisdictional challenge).

Oral construction contracts

Issues about the parties’ construction contract can be complicated and technical. It’s not surprising that Mr Conway struggled to present this part of his case on his own. I’m sure there are lots of people out there who may agree with him that with three sites, three bills of quantities and so on, it is logical to argue that there were three sub-contracts. After all, not everyone has a grounding in the basics of contract formation and the nuances of contract interpretation.

Irrespective of that, it was interesting to read Coulson J’s final remarks about the repeal of section 107 of the Construction Act 1996. He suggests that adjudicators now have to:

“… grapple with entirely oral contracts, with all the uncertainty and contention that such a situation can engender.”

While it can undoubtedly add complexity to the adjudicator’s task, I would not go so far as saying that it is not possible for an adjudicator to deal with oral contracts and or determine disputed matters of contract formation based on incomplete and/or limited evidence.

Although I accept that, ideally, every dispute referred to adjudication would arise under a written, signed and fully documented contract, in my experience, this is not always the case. Anecdotally, I have heard it said that, in many instances, the parties are less interested in the legal niceties regarding contract formation, and are more interested in obtaining “an” answer that they can live with and which will bring an end to their dispute and enable them to move on.

When I reflect on the catalyst for the introduction of adjudication and what it was seeking to replace, it appears to me that the inclusion of disputes arising under oral contracts is more likely to be consistent with how a large sector of the construction industry conducts its business affairs. It also means that those parties can potentially get an answer in a relatively quick and cost effective way, albeit that what they saved on legal fees at the outset may end up costing them more in the long run.

MCMS Ltd Matt Molloy

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