REUTERS | Rupak De Chowdhuri

Who are the parties to a contract?

Reading the judgment in Dacy Building Services Ltd v IDM Properties LLP, it reminded me of just how tough it can be being an adjudicator, albeit you may not know this when you accept an appointment. At that stage, you have only seen the notice of adjudication, so you only have one party’s take on the dispute you are being asked to decide. Things are seldom clear cut and will often change, as the adjudicator discovered in this case.

Dacy Building Services Ltd v IDM Properties LLP

By the time this dispute reached Jefford J in the TCC, the key issue was really who the parties to a particular contract were. However, when it was referred to the adjudicator, Mr Eyre, it seemed to be a relatively straightforward payment dispute, based on an oral contract that was, allegedly, reached at a meeting at a bus station.

Pausing there, I don’t know why the thought of the parties meeting at a bus station makes me smile, but it does. I even looked the project’s address up on Google maps, and found that the parties had a choice of two bus garages to go to, along with a Greek Orthodox church and a Tesco’s. I presume it was the nearest sensible place to the site to meet, although I think I might have been inclined to try “The Bear” instead for its “Brilliant selection of beers, great food, friendly staff”, but I digress…

Back to the parties’ dispute

A payment dispute arising out of an alleged oral contract. The key issue was all about what took place at that Camberwell bus station and who said what. Did Mr McLoughlin agree with Mr Keran that Dacy would be working for IDM and would get paid by IDM (and which IDM company?). Or was Dacy working for HOC?

The issue isn’t helped by the number of parties involved. As far as I can tell:

  • In September 2014, O’Loughlin Leisure Ltd and HOC (UK) Ltd entered into a JCT Design and Build Contract, 2011 Edition for a mixed use development in Camberwell. The employer’s agent was Mr Walder of IDM Properties.
  • O’Loughlin was a joint venture with Fastmild Ltd. Fastmild was a subsidiary of IDM Investment Holdings Ltd.
  • By November 2015, HOC was experiencing financial difficulties. Dacy knew this because it was a sub-contractor to HOC on another project. O’Loughlin and Fastmild knew this because they arranged for IDM Construction London Ltd to manage the Camberwell site. There was also an arrangement whereby an independent quantity surveyor, Mr Taylor, would approve payments on behalf of HOC and IDM Investment Holdings Ltd would pay sub-contractors directly.

This all lead to the 3 December 2015 meeting between Mr Keran and Mr McLoughin, which may have been arranged by Mr Cutmore of HOC, or was it a chance encounter, as Mr McLoughlin says? In a bus station? (It sounds a bit like Trevor Howard and Celia Johnson, although that was a brief encounter in a train station!)

Dacy says an oral contract was reached in the bus station and it was with IDM Properties. IDM says that Dacy was working for HOC. Jefford J described this as a “direct conflict of factual evidence”. She also noted that “there was little or no consistency in the issuing of instructions” to Dacy, with some coming from Mr Cutmore and some from Mr Hewson (who was acting for IDM Construction London, IDM Properties or even HOC).

Either way, at the time that work started, I suspect the parties did not give too much thought to who was in contract with who. Dacy invoiced for the labour, plant and materials it provided and it only became an issue when it did not get paid (on its third invoice). Dacy’s invoicing appears less complicated, as the first four were sent to Mr Cutmore at HOC (and were addressed to HOC). The fifth and sixth invoices were addressed to Mr Taylor at IDM Properties.

The adjudication

We don’t really know what the adjudicator made of all the facts, but we do know he decided that Dacy was owed some £247,000. (Dacy had claimed for the amounts set out in invoices four, five and six plus the retention monies from the first three invoices.) Presumably to do so, he concluded that Dacy’s contract was with the responding party, IDM Properties.

Who was Dacy’s contract with?

The fact that the court could not ascertain whether or not a contract had been entered into highlights the difficulties an adjudicator may face when dealing with oral contracts and associated jurisdictional issues, especially with evolving cases.

This is an issue the court now has to address. Although the judgment does not say so, I presume the parties will now proceed to a trial (unless they settle their dispute first). Perhaps that will happen, since Jefford J has suggested that IDM has a:

“…realistic prospect of succeeding in its defence that there was simply no contract between it and Dacy.”

Deciding that issue will involve witness evidence, which has already been put before the adjudicator and the court (although it isn’t clear if anyone has been cross examined yet).

Witness evidence

That thought reminded me of a blog I wrote a few years ago about witnesses’ memories, which concerned Leggatt J’s comments in Gestmin v Credit Suisse (UK) Ltd. In that case, the events happened seven years before trial, whereas here the parties prepared witness statements for an adjudication that took place just seven months later (and court proceedings less than six months after that).

In that blog I referred to Leggatt J’s suggested approach to witness evidence, which is for a judge to:

“…place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.”

I also agreed with Leggatt J that there is value in a witness giving evidence and being cross-examined, especially as this allows you to:

“…subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness.”

Leggatt J also gave a warning about witnesses:

“…it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

With those thoughts from Leggatt J in mind, it will be interesting to see how a court unpicks these events and whether that “realistic prospect of succeeding in its defence” is limited to the CPR 24 application or is of more general relevance. It will also be interesting to see who the court decides the contracting parties were, although I suspect we may already have a clue:

“Rather it is a case about who any contract was with (as it was in Estor [v Multifit]). In such a case, and it is comparatively unusual that that is the issue, what happened after the contract was allegedly formed may also provide an answer by illuminating the credibility of the parties’ cases. To give a simple example, if all contractual exchanges have been between parties A and B, it may be difficult, to say the least, for party B to then contend that the contract was between party A and party C.”

MCMS Ltd Matt Molloy

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