Legal comment  - Peter Horne

 

What do you do when, part way through an article, the Court of Appeal hands down a judgment which shows that your basic premise may be wrong? Please forgive any apparent inconsistency.  Apart from the terms 'arbitration agreement' and 'construction contract', s.5 of the Arbitration Act 1996 and s.107 of the Housing Grants Construction and Regeneration Act 1998 are effectively identical:

 

Agreements to be in writing

Section 5

1.      The provisions of this Part apply only where the arbitration agreement [construction contract] is in writing, and any other agreement between the parties as to any matter is effective for the purposes of this Part only if in writing.  The expressions "agreement", "agree" and "agreed" shall be construed accordingly.

2.      There is an agreement in writing -

1.                  if the agreement is made in writing (whether or not it is signed by the parties).

2.                  if the agreement is made by exchange of communications in writing, or

3.                  if the agreement is evidenced in writing.

3.      Where parties agree otherwise than in writing by reference to terms which are in writing, they make an agreement in writing.

4.      An agreement is evidenced in writing if an agreement made otherwise than in writing is recorded by one of the parties, or by a third party, with the authority of the parties to the agreement.

5.      An exchange of written submissions in [adjudication proceedings, or in] arbitral or legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party against another party and not denied by the other party in his response constitutes as between those parties an agreement in writing to the effect alleged.

6.      References in this Part to anything being written or in writing include its being recorded by any means.

 

My theme was to be that the intention of both Acts is to draw as many agreements as possible within the ambit of resolution by arbitration or adjudication and that judgments which are contrary to this premise are suspect and may not be followed.

 

In Grovedeck Ltd -v- Capital Demolition Ltd (an adjudication enforcement case) one of the issues was whether an oral contract became a contract in writing by virtue of submissions in the adjudication itself (ie subsection 5). Contrary to expectations, the judge decided that the submissions must have been in a previous adjudication and that submissions in the current proceedings were insufficient. This part of the decision has been widely criticised. Apart from the apparent intent of Parliament to pull as many oral contracts as possible within the definition of 'in writing', I had always thought of this provision as being founded in equitable estoppel - by allowing one party to proceed under the (mis)apprehension that a particular situation exists the other party should be prevented from subsequently denying that situation. If the judge is correct, it would appear to me that subsection 5 is otiose - it can never come into existence if it cannot be used for the first time!

 

I had been encouraged in my overall theme by Total M and E Services Ltd. -v- ABB Building Technologies Ltd. (Formerly ABB Steward) Ltd in which the court at first instance had decided that oral variations to a contract in writing (which itself did not provide for variations) also fell within the contract in writing.

 

he first instance case of RJT Consulting Engineers Ltd -v- DM Engineering (Northern Ireland) Ltd was one of the cases which showed that the courts were taking a robust attitude to the section. In that case, the oral contract was transformed by subsequently being evidenced in writing (subsection (2)(c)). This subsection had ―appeared to be extremely wide and, for instance, could include a written statement confirming that work which had been ―carried out was in accordance with an oral agreement (ie no necessity for detailed terms). Unfortunately for those of us who were pleased to see the wide net, the Court of Appeal thought otherwise and has construed subsection (2)(c) as requiring the ―essential elements of the contract to be ―evidenced in writing. Although I believe that this judgment is misconceived and is contrary to the intention of Parliament, it is a Court of Appeal judgment and appears to provide a precedent which would bind all first instance courts.

 

Even this minor set-back has not deterred me from my opinion that the intention of the section is to take as many contracts as possible within the net to provide for resolution outside the courts. This is fully compliant with CPR (although the Arbitration Act is pre-CPR) and the Construction Protocol.

 

In particular, this section goes to 'threshold' jurisdiction. Is there any reason why a court (even TCC) should be more competent than an arbitrator or adjudicator to determine the terms of an oral contract? If not, then why should it be more desirable to resolve the matter in litigation rather than by investigation by suitably technically qualified professionals?

 

Peter Horne