| Date | 25 April 2001 |
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| Judgment | Joseph Finney Plc -v- Gordon Vickers and Gary Vickers t/a The Mill Hotel TCC 7 March 2001 |
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| The Issue | The threat of adjudication leading to compromise agreements. |
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| Implication |
An agreement to compromise a dispute is itself binding, which may be sued upon. Although the underlying disputed matters may give rise to an adjudication, the compromise is not capable of referral to adjudication. |
printThe promise not to adjudicate is a promise of value. So said His Honour Judge David Wilcox in a recent case in the Technology and Construction Court. Joseph Finney Plc undertook to carry out building works for the provision of further accommodation at a hotel for Gordon and Gary Vickers who were trading as the Mill Hotel, in Chester. The contract sum was for £2.85 million and contract documentation was prepared by quantity surveyors engaged by Vickers, based on the JCT 1980 standard form. Confusion over certain amendments to the JCT standard form (which is prepared with confusion as a backdrop) caused considerable difficulty in the court on a point of fundamental principle. Was the court empowered to intervene to resolve the disputed matters between the parties, or had there been an agreement that such disputes should be referred to arbitration? Of course, it would be a lot clearer if the JCT could make its mind up about such questions, rather than to leave it to the parties at the time of making the contract. However, left to the devices of the quantity surveyors employing their best scissors and paste techniques, the contract had been prepared in such a manner that doubt was inevitable. Judge Wilcox had some sympathy with their task. He considered part of the JCT guidance on how to complete the contract. "The guidance notes in the rubric of Amendment 18 for users wishing to incorporate the amendments arising from the Housing Grants, Construction and Regeneration Act suggests that they should either amend the Form of Contract in accordance with amendment 18 and execute the Contract as so amended with each amendment initialled by or on behalf of the parties, or cut out the pages 5 to 13 and delete all amendments not marked with a bullet point and insert in the Articles an additional article stating that the conditions shall have effect as modified by the amendments in Amendment 18 attached hereto and not deleted." Judge Wilcox concluded that, despite the inelegance of expression and clumsy means of amendment, the parties had agreed that the means of dispute resolution chosen was that of legal proceedings under clause 41C. Having therefore determined, no doubt at considerable expense to the parties, that the court was able to deal with the real dispute, Judge Wilcox proceeded to consider the case before him. Finney's application for payment No.13 had resulted in an Architect's certificate No 13 certifying that approximately £346,000 was due. Two weeks later Vickers had given a notice of withholding in accordance with the Construction Act that it would withhold £347,000. The grounds for withholding were cited as 14 weeks delay giving rise to an adjustment of preliminaries and liquidated and ascertained damages, and defective and incomplete works. Unsurprisingly, Finney was unimpressed with the notice of withholding, which, if judged only by the amount, seemed somewhat contrived. Finney immediately wrote to Vickers demanding payment of the certified £346,000 failing which it would commence adjudication. It asked for a response within two days, even though the final date for payment of the certified amount would not fall for another 7 days. That same day a telephone conversation took place between representatives of Finney and Vickers. Agreement appeared to have been reached to pay the certified sum. Vickers faxed Finney with regard to certificate No. 13. "We wish to inform you that this will be paid as per invoice". Finney responded by fax acknowledging that the amount due in respect of certificate 13 would be paid and on this basis confirmed that it would not be proceeding with the appointment of an adjudicator. The following working day things turned nasty. Vickers wrote to Finney to advise that it had now considered the matter very carefully. The fax it had sent did not invalidate the notice of withholding which, it noted, remained wholly valid and effective. The statement that the certified sum would be paid was not to be taken to mean that payment would be made. Payment (or non-payment) would always be "subject to both sides contractual rights and obligations". Wheel in the lawyers. Finney responded that it was not too keen to play these games. It would proceed with the adjudication without further notice. At the same time, it would now commence court proceedings to sue upon the compromise agreement which it regarded as breached. Judge Wilcox reviewed the evidence comprising witness statements from the principle players and the relevant correspondence. He concluded that the correspondence contained a clear promise by Vickers to pay in accordance with the invoice and the contract. In consequence Finney had promised not to proceed with an adjudication to enforce its rights under the contract. An exchange of mutual promises was good consideration capable of founding an agreement in law. The promise not to adjudicate was a promise of value. An adjudication would involve expenditure of resources in terms of time, money and personnel. As long as the parties were bound by that contract to compromise, Finney could not have pursued an adjudication on certificate 13. On the evidence before Judge Wilcox there was no arguable case that a compromise agreement had not been concluded between the parties. Vickers had repudiated that agreement by its letter seeking to extricate itself from its agreement to pay. Finney was therefore entitled to summary judgment in the sum of £346,000, without the need to trouble an adjudicator as to the correct balance due between the parties.
CJ-0116
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