Adjudicating an oral contract – existence of contracts denied

Dacy Building Services Ltd v IDM Properties LLP [2017] BLR Plus 10, QBD TCC

Facts

Dacy was a building contractor which was approached by a company called HOC to attend a meeting on a building site run by IDM.  Subsequently Dacy started work on that building site and sent the first 4 invoices to HOC.  None of the parties could agree who had a contract with whom.

Dacy eventually decided that HOC had been acting as agent for IDM and issued a 5th and 6th invoice against IDM.  None of them were paid and it went to adjudication against IDM.

The adjudicator had to decide:

1. whether or not a contract existed; and
2. what the terms of that contract were.

He made an award in Dacy’s favour.  IDM refused to pay and the case was taken to Court.

Held

1. The matter would have to go to a full trial. The adjudication decision would not be enforced on a summary basis due to the fundamental disputes as to the existence as well as the terms of the contract.
2. IDM was entitled to argue that the adjudicator had no jurisdiction, because it maintained that there was no construction contract between the parties.  The existence of the construction contract was a necessary pre-condition of the existence of jurisdiction.

Comment

a) Where the subject matter of the alleged contract has in fact been performed, the Courts will always try to find that a contract exists rather than otherwise.

b) If the Respondent wants to object to jurisdiction in the adjudication, he should do so as promptly and clearly as possible.  In this case an objection to jurisdiction was in any event implicit in the assertion that no contract existed.

c) The adjudicator’s ruling on whether or not he has jurisdiction is only binding on the parties if the question is being specifically referred to him and the parties agree that he may decide this point otherwise a decision resting on such a finding could be challenged as lacking jurisdiction.

d) Although adjudicators have had jurisdiction to deal with oral contracts since 2010 this is always a difficult exercise, especially where one party denies the existence of a contract, not just the terms.  Well advised claimants should avoid such adjudications since it is very likely that a decision in their favour will end up being challenged in just this way.  There are times when going straight to court is actually cheaper and quicker.

For more specialist legal advice call Keith Bishop, Head of Construction & Engineering, on

0191 211 7983 or email [email protected]