| Date | 21 July 2004 |
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| Judgment | Connex South Eastern Ltd v M J Building Services Group plc, TCC 25 June 2004 |
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| The Issue | The requirement to record agreements in writing for the purposes of the Construction Act. Whether an adjudication may proceed after a contract has been discharged by repudiation. |
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| Implication |
A contract which is evidenced in writing by minutes recording an instruction to the contractor to proceed will be caught by the provisions of the Construction Act. Adjudication remains available to the parties after completion of the contract works or repudiation of the contract. |
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The recent case of Connex South Eastern v M J Building Services Group considered the requirement for an agreement to be in writing within the meaning of Section 107 of the Construction Act, and also examined whether a party has the right to refer a dispute to adjudication under the provisions of the Construction Act if the contract has been discharged by repudiation. M J were contractors experienced in installing closed circuit television systems. They had entered into a contract with Connex to provide CCTV systems for 50 stations throughout the franchise areas that Connex held for the rail networks in Kent and Sussex. As is so often the case with projects of this type, the procurement processes were appallingly lax. No written order was issued by Connex and no contract between Connex and M J was signed. M J had responded to an invitation to tender, following which a meeting had taken place between the parties during which a representative of Connex had instructed M J that they were to commence work. The minutes of the meeting recorded that Connex had given an oral instruction that the project was to be carried out immediately. Soon after commencing the works, Connex wrote to M J stating that all CCTV works were to be suspended until further notice. Meetings were held to discuss revised programmes and schedules of work and eventually the works were resumed. A year later however, by which time Connex had been acquired by another company, M J received instructions that no further works were to be commenced. The works were brought to a halt and M J made claims for approximately £200,000 for work carried out to date. The parties failed to reach agreement upon outstanding payments, and in due course M J wrote to Connex saying that it had repudiated the contract and that M J had accepted that repudiation. One and a half years later, M J commenced adjudication proceedings. Before the adjudication proceeded, the parties agreed to refer certain points to the court for declarations as to whether adjudication was appropriate in the circumstances. Connex argued that there was no agreement between the parties recorded in writing as required by Section 107 of the Construction Act. It also argued that M J no longer had any statutory right to adjudication under Section 108 of the Act in circumstances where it had argued that the contract was discharged by repudiation. Section 107 of the Construction Act provides that the Act will only apply where the construction contract is in writing or if the agreement is evidenced in writing. Connex relied upon the case of R T J Consulting Engineers v D M Engineering and argued that to fulfil the requirements of Section 107 of the Act, the complete agreement between the parties, or alternatively at least all material terms, must be in writing. M J argued that whether or not that was correct, it was manifestly not the intention of Parliament to exclude from the jurisdiction of an adjudicator an agreement solely because it contained implied terms. His Honour Judge Richard Havery QC confirmed that the instruction to commence work constituted an acceptance of M J’s tender. Judge Havery concluded that the minutes which recorded the instruction to proceed were written with the authority of the parties and therefore constituted written evidence of the acceptance of the contract falling within Section 107(4) of the Act. The next question Judge Havery had to address was whether acceptance of repudiation of an agreement brings to an end a provision for adjudication. Connex argued that it was an abuse for M J to start adjudication proceedings one and a half years after it had argued that it had accepted the repudiation of the contract on the part of Connex. It was accepted that under Section 108 of the Act, a party is entitled to give notice of its intention to refer a dispute to adjudication at any time. Connex argued however, that the right arose only during the currency of the contract and the words “at any time” had to be construed with that in mind. It was plain that Parliament did not mean that an adjudication notice could be given a hundred years after the dispute had arisen. Judge Havery was satisfied that whilst no limitation period is laid down for instituting an adjudication, a limitation defence must be taken into account by the adjudicator. It was well established that an adjudication could take place after works under a contract had been completed and he was satisfied that, as long as there was a possibility of a dispute arising under the contract, the right to seek adjudication would remain. There was no reason not to give the words “at any time” their plain and natural meaning. Judge Havery rejected the argument that adjudication was intended only to relieve cash flow problems arising during the course of a contract and could not be used in the case of a dispute where a repudiation had been accepted. In consequence, the declarations sought by Connex were refused and the adjudication could proceed to deal with matters in dispute between the parties.
CJ-0429
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