Sarah Lidgett

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Demystifying recent cases

Foundations / 27 March 2018

Oral contracts

The difficulties with construing oral contracts in adjudication enforcement proceedings have once again risen to the fore in two recent cases, with the courts having to deal with whether there is, in fact, an oral contract at the enforcement stage.

In a case decided last month, Dacy Building Services Ltd v IDM Properties LLP, the dispute centred on what was orally agreed during a meeting held at a bus stop.  IDM’s case was that no oral agreement was reached at all with Dacy, and that Dacy was working on site for an entirely different entity which became insolvent.  An adjudication took place following a dispute arising out of the purported oral construction contract. However, the court held in the subsequent enforcement proceedings that whilst there was a real prospect of IDM succeeding in its defence that it did not have a contract with Dacy, the factual dispute was too complex to determine summarily.  It therefore ordered an expedited trial, which ultimately agreed with the adjudicator’s findings that there was in fact such a contract.  In giving judgment, the court commented on the “latitude” that courts should give adjudicators who have to deal with oral contracts, and the approach that should be taken when reviewing witness evidence, particularly when a witness appeared confident in their recollection of events about the oral agreement.  It also looked at the case of Blue v Ashley, and the difference between an intention to create legal intentions and “simply banter in a public house during consumption of a gallon of ale (or lager)”.  One of the key issues arising out of this case, however, was its reliance on factual circumstances and the need to apply a certain level of common sense when interpreting parties’ intentions.

Then earlier this month, in M Hart Construction Ltd and another v Ideal Response Group Ltd, the dispute centred on liability for works carried out to the athletes’ village at the Olympic Park under two contracts, initially by Mr Hart and then (allegedly) novated to M Hart Construction Ltd.  Ideal denied that any novation had taken place, because it had not consented to it.  Whilst the adjudicator disagreed and decided that there had in fact been novation, in the subsequent enforcement proceedings the court felt that there was insufficient evidence to infer or imply that novation had taken place.  There would, therefore, be a realistic prospect of Ideal successfully defending the claims on the ground that the contracts had not been novated, so the dispute would have to proceed to trial.

In the wake of these cases, there appears to be some confusion over disputes as to whether there has been an oral agreement can lead to successful enforcement proceedings without the need to proceed to a full trial.  However, with each case appearing to turn on its own facts, it may be a matter of time to see which approach ultimately prevails.

True value adjudications

With a lot of commentary on Grove Developments Ltd v S&T (UK) Ltd given already, we do not propose to reinvent the wheel.  We have simply drawn attention to a couple of points that seem to us the most salient.

In brief, the court held that an employer can start a second (counter) adjudication to dispute the true value of the works that the contractor claimed for in an interim application for payment in the absence of a pay less notice.  This effectively upturns what had become the accepted position following ISG Construction Ltd v Seevic College and Galliford Try Building Ltd v Estura Ltd, that a failure to serve a payment or pay-less notice meant that the employer had agreed or was deemed to have agreed on the value stated in the payment application.

In giving the decision, the court noted that a dispute about valuation is different from a dispute about the sum stated in a notice. Therefore, the true valuation would not have been decided in the earlier adjudication about notices.

Much commentary has followed, mainly focused on the effect this will have on ‘smash and grab’ adjudications and the likely increase in employers commencing true valuation adjudications instead of paying the sum stated as due.  However, by the same token, another commentary has suggested that the decision may make adjudicators more sympathetic to the plight of a contractor, and so they may be more likely to succeed in ‘smash and grab’ adjudications.

In any event, whilst the importance of the case should not be underestimated, it may in practice have little effect.  Given the additional cost parties will inevitably incur in dealing with a subsequent adjudication, if the contract is still in play the employer may be better off waiting until the next valuation date to take up the issue by reflecting the payment made in a subsequent payment or pay less notice.  The true effect, therefore, remains to be seen.

Construction Health and Safety: Monthly Case Update

  • A solar panel installation company and its sole director were fined £10,000 and £500 respectively for failing to manage and control fall from height risks when two workers were installing solar panels on the roof without any form of fall protection, following a concern raised by a member of the public. [Sasie Ltd]
  • A scaffolding company has been fined £100,000 following an apprentice joiner falling four metres backwards under a single guard-rail after getting his foot caught in a gap between the scaffold platform and the loading bay.  The insufficient edge protection and lack of toe board caused numerous injuries including a fractured cheekbone and a broken wrist. [Bland Scaffolding Ltd]
  • A construction company has been fined £20,000 after a HSE inspector discovered an unsupported, deep excavation that had insufficient controls to prevent access and potential injury to members of the public, and was observed to be moving a steel beam in an unsafe manner.  Failure to comply with an improvement notice and lack of risk assessment for the listing operation caused the breach. [Toft Construction Ltd]
  • A contractor was fined £28,000 after it was discovered they didn’t have the appropriate licence to be removing asbestos from a junior school during a refurbishment, nor did they put in place adequate planning or measures, exposing employees to high levels of airborne asbestos fibres. [R F Gardiner Ltd]
  • Two companies were fined £26,000 and £31,500 respectively after a grounds worker was run over by a telehandler whilst working in the middle of the construction site road.  Various failures, including the absence of an adequate traffic management plan, caused the worker to suffer a chipped vertebra, muscular and tendon damage and post-traumatic stress disorder. [Bellway Homes Ltd and A D Bly Construction Ltd]

If we can help with any of the issues raised above, or indeed any other queries you may have, please do get in touch.

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