Remember March 2004? Very few of us had a Blackberry, Katie Price and Peter Andre had recently met in the jungle, and Tony Blair was still Prime Minister. It was also the month that Gordon Brown, then Chancellor of the Exchequer, announced a review of the Construction Act 1996. Well, after seven years and what seems like endless consultation, the amendments to the Construction Act 1996 finally came into force in England and Wales on Saturday (1 October 2011). They have another month to wait north of the border.
Repeal of section 107
While I was out running on Saturday morning, I started to think about how long it will be before I am asked to adjudicate a dispute under the Construction Act 1996 (as amended) and how I’ll deal with that dispute. In particular, issues arising out of the repeal of section 107 requiring construction contracts to be in writing.
Some very interesting pieces have already been written by Paul Flook, Jennie Gillies and Lynne McCafferty on how the repeal of section 107 will affect adjudication. I thought I’d set my thoughts out in the form of a scenario:
- Let’s imagine we have a brickwork sub-contractor and main contractor negotiating a brickwork sub-contract around the end of September/beginning of October 2011. As it is party conference season, let’s call them Ed (the brickwork sub-contractor) and Dave (the main contractor).
- Dave and Ed enter into a contract but do not record it in writing.
- In early 2012, a payment dispute arises, which Ed refers to adjudication.
- I am appointed adjudicator to decide that dispute.
Unsurprisingly, the type of issues that might arise as a result of the parties’ oral contract are:
- No contract.
- Pre-1 October 2011 contract.
- Disputed terms of the oral contract.
It may well be the case that, on receiving the referral, Dave immediately argues that he and Ed didn’t enter into a contract because they couldn’t agree all of the essential terms. For example, Dave might say that Ed’s quotation for the work was ridiculously high and he never accepted it.
Dave’s argument will go to my threshold jurisdiction to decide the dispute and I will therefore need to address it and reach a non-binding conclusion early in the adjudication (unless the parties agree that it is to be binding).
The important question is, will I hold a meeting at this stage in the adjudication to hear oral evidence on this matter? It’s certainly a possibility, but it will depend on the parties’ submissions on the jurisdictional challenge. For example, if Dave and Ed have submitted detailed witness statements supported by contemporaneous written evidence (remember that, just because the contract is oral, it doesn’t mean that there won’t be any contemporaneous written evidence), a meeting might not be necessary.
Unless there is going to be cross examination of witnesses, is there any point in convening a meeting simply so Dave, Dave’s business partner Nick, Ed and, possibly, Ed’s brother David (if they’ve made up…) can regurgitate what’s in their witness statements?
If my non-binding conclusion is that I have jurisdiction and I go on to find in favour of Ed, Dave could attempt to resist enforcement of my decision by relying on his “no contract” jurisdictional challenge. The TCC could therefore consider my findings on whether the parties entered into a contract.
Pre-1 October contract
Given that Dave and Ed were negotiating at the end of September 2011, I wouldn’t be at all surprised if Dave tries to argue that he and Ed entered into an oral contract prior to 1 October 2011. This issue also goes to my threshold jurisdiction, so the same factors as above apply.
Disputed terms of the oral contract
Personally, I think this is going to be the most common argument we will see as a result of the repeal of section 107.
In the response, Dave may agree that he and Ed entered into a contract, but he may still argue over the terms of that contract. For example:
- Dave might say that they agreed that Ed would complete the brickwork within 12 weeks, but Ed might argue that the programme was 16 weeks.
- Alternatively, Ed might acknowledge that the programme was 12 weeks, but contend that the parties verbally agreed to vary this requirement to 16 weeks part way through the works.
Again, whether I will need a meeting to hear oral evidence on these points will depend on the parties’ evidence. In the absence of Ed submitting any witness statements etc, will it be appropriate for me to convene a meeting to elicit the information or should I simply decide that Ed’s case on the programme fails because he hasn’t provided me with any supporting evidence?
An important point is that, whatever I decide about the disputed contract terms will be part of the substance of my decision, and will not go to my jurisdiction. Dave will therefore be unable to rely on it in any enforcement proceedings.
When will all this happen?
I’m guessing that adjudicators will start to see the first disputes under the Construction Act 1996 (as amended) in early 2012, and the inevitable enforcement cases will be in the TCC not long afterwards. It is obviously difficult to predict how the “new law” on the amended Act will affect adjudication. However, one thing is certain: once the disputes arising under pre-1 October 2011 contracts have dwindled away, the words RJT Consulting Engineers v DM Engineering will fade away (or will they, given that we might still have to decide whether the provisions of section 108 are in writing…).