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Contracts in writing again

19 Dec 11 Camden Council's challenge to an adjudicator's awards has been dismissed by the Technology and Construction Court. The Council had argued that the adjudicator appointed to the dispute with contractor Sprunt Ltd.

Lacked jurisdiction because there was no contract in writing and because the adjudicator had been appointed by the Royal Institution of Chartered Surveyors (RICS) and not the Council itself. The judge found that there had been a contract based on a letter Sprunt had sent to the Council offering to reduce its fees by 5%. Both parties ' conduct after this had established that a contract was in place. The court also rejected the argument that  Camden  should be the Adjudication Nominating Body. It is a contravention of the Housing Grants, Construction and Regeneration Act 1996 for a contracting party to be an Adjudication Nominating Body as this would jeopardise the requirement that the adjudicator be impartial.

In 2001 Sprunt entered into a Framework Agreement with the Council for the provision of building consultancy services after being successful in the tender process. The contract was contained or evidenced by the Council’s “Tender Document for Building Consultancy Services 2001-2004/6”. 

Clause 25 of the framework provided for dispute resolution. The clause said that any disputes were to be referred to adjudication in accordance with the Scheme for Construction Contracts 1998 with the Council being the specified nominating body. Over the next few years, the Council awarded Sprunt 37 commissions.

In 2003, the Council invited Sprunt to tender for the provision of building consultancy services in a number of disciplines for two projects, the Ampthill Square Estate and the Godwin & Crowndale Estate. The Council accepted Sprunt’s tender for both projects by a letter dated 15 July 2003. This contract was not procured through the existing Framework Agreement, but the conditions of contract which applied were virtually identical. The Ampthill project was later divided into two phases. There were disputes between Sprunt and the Council on both phases over Sprunt’s fees. Sprunt wrote to the Council on 12 June 2006 offering to reduce their fees by 5.5%.

In the end, Sprunt issued a Notice of Adjudication and the RICS appointed an adjudicator. The Council said that he lacked jurisdiction because the Framework Agreement stated that the Council would be the nominating body. They also raised an argument that the parties’ agreement had not been in writing for the purposes of section 107 of the Housing Grants Construction and Regeneration Act 1996. The Council referred to the Framework Agreement and to the fact that under its terms there were to be commissions which were to be the subject of further agreements between the parties. The Council said that the only document which could be construed as a contract was the letter of 12 June 2006, but this did not contain all the terms of the commission; it simply referred to an agreement to provide the services for a fee of 5.5% which, contrary to the terms of that letter, was the fee set by the framework agreement for a building contract of this value.

CONTRACT IN WRITING

It was common ground that that there was a contract between the parties in relation to Phases A and B of what was originally the Ampthill Square Estate project. It was really only if the agreement as ultimately entered into was entirely made orally or partly orally and partly in writing that it would fall foul of the requirements for writing prescribed by section 107.

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Sprunt argued that the parties had operated under the Framework Agreement until it sent its letter to the Council on 12 June 2006 which, in effect, the Council accepted by conduct. The judge agreed. This letter had effectively been established as an agreement by conduct since both parties proceeded as if it had been accepted. The Council accepted the Phase A claims and the early additional services; it also accepted the Phase B 5.5% fee claims and paid them. There was the clearest evidence that the incorporation of or reversion to the Framework Agreement in relation to Phase B was agreed and accepted by both parties. Consequently, the Phase B agreement was evidenced in writing or was to be treated as being in writing because of the letter of 12 June 2006 and because it could be said that the parties made an agreement in writing because they agreed "otherwise than in writing by reference to terms which [were] in writing" for the purposes of Section 107(3).

THE NOMINATING BODY

The Council argued that it, and not the RICS, was the correct adjudication nominating body. Clause 25.11 of the Framework Agreement contravened section 108(3) of the Act because it provided that that the adjudicator’s decision would not be binding until challenged in legal proceedings. Because of this, section 108(5) came into play and the adjudication provisions of the Scheme applied. The adjudication provisions in the parties’ agreement were, therefore, to be disregarded.

Paragraph 23 of the Scheme provides that neither a natural person nor a party to the dispute can fulfil the role of adjudication nominating body. In addition, it was contrary to the policy of the Act for the contract to specify that one side should nominate the adjudicator. Section 108(2)(e) imposes a duty on the adjudicator to act impartially and there was a danger that an adjudicator appointed by one of the parties would not be impartial. In the judge’s view, the reason why the Council wanted to retain the right to nominate the adjudicator was so that they could either nominate someone who was sympathetic to them, or someone who was very expensive compared with the amounts at issue so that Sprunt might be intimidated into not going to adjudication. The contractual provision permitting the Council to nominate its own adjudicator was also in contravention of the Act; consequently the RICS was a valid nominating body and the adjudicator had been validly appointed.

Sprunt Ltd. v London Borough of Camden [2011] EWHC 3191 (TCC)

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