RCS Contractors Ltd v Conway

INTRODUCTION

The claimant, RSC Contractors (“RSC”) seeks £59,551.65 inclusive of interest pursuant to the decision of an adjudicator dated 25 November 2015. On 6 May 2016, the defendant, Mr Conway, successfully obtained leave to defend the claim “limited to the sole ground that the adjudicator had no jurisdiction, because it is said he has wrongly concluded that there was one construction contract for the works at the three sites”: see the order of Soole J dated 6 May 2016. For reasons which are unexplained, the trial of that issue has not occurred until today, 4 April 2017.

FACTUAL BACKGROUND

RSC carried out groundworks for Mr Conway as a sub-contractor at three sites: Walmer Road, Notting Hill, London; Middlemas Green, Pewsey, Wiltshire; and Ridge Road, Sutton, Surrey. RSC say that there was one oral contract for the work at these sites, but Mr Conway maintains that there were three separate oral contracts and that, in consequence, the adjudicator did not have the necessary jurisdiction. That is now the only issue for the court to decide.

For completeness, I note that Mr Conway has advanced other arguments in the past about the precise contractual relationship between Shaw Interiors Limited (“Shaw”), RSC and himself. At one stage, he was suggesting that he was not a party to any contract with RSC at all. However, it is plain from the documents that these issues no longer arise because the remaining dispute - was there one or more contracts between the parties? - presupposes that the relationship between Mr Conway and RSC was a relationship between contractor and sub-contractor. Any doubt about that as the starting-point of the court’s investigation was, in any event, dispelled by:

THE LAW

Section 108(1) of the Housing Grants Construction Regeneration Act 1996 (“the 1996 Act”) provides that:

“A party to a construction contract has the right to refer a dispute arising out of the contract for adjudication.”

Because there was no written contract in this case, it was common ground that the Scheme for Construction Contracts, England and Wales Regulations 1998 (as amended) applied.

The orthodox view is that s.108(1) allows the reference of a single dispute to adjudication, and there are a number of authorities where the attempted reference of more than one dispute at the same time was found to have deprived the adjudicator of jurisdiction. Although that view was challenged by Ramsey J in Willmott Dixon Housing Limited v Newlon Housing Trust [2013] EWHC 798 (TCC), his remarks were obiter and have not been subsequently adopted: see for example the judgment of Akenhead J in TSG Building Services PLC v South Anglian Housing Limited 2013] EWHC 1151 (TCC). I shall therefore decide this case on the orthodox basis that an adjudicator approved under the Scheme can only decide one dispute at a time.

Of course, any difficulties that might have arisen from this approach have been ameliorated by the broad interpretation given by the courts to the word “dispute”. In a much-cited passage, HHJ Thornton QC in Fastrack Contractors Limited v Morrison Construction Limited [2000] BLR 168, defined a single dispute as follows:

“20.

…During the course of a construction contract, many claims, heads of claim, issues, contentions and causes of action will arise. Many of these will be, collectively or individually, disputed. When a dispute arises, it may cover one, several or many of one, some or all of these matters. At any particular moment in time, it will be a question of fact what is in dispute. Thus, the ‘dispute’ which may be referred to adjudication is all or part of whatever is in dispute at the moment that the referring party first intimates an adjudication reference. In other words, the ‘dispute’ is whatever claims, heads of claim, issues, contentions orcauses of action that are in then in dispute which the referring party has chosen to crystallise into an adjudication reference.”

Because of the width of that test, there are few cases where the court has concluded that the adjudicator did not have the necessary jurisdiction because more than one dispute had been referred simultaneously. By far the biggest category of case in which it has been argued that more than one dispute was referred, thereby depriving the adjudicator of jurisdiction, is where there was more than one contract between the parties. Thus:

Accordingly, the issue which I have to decide is a simple one. Either, as RSC maintains, there was one contract between the parties to cover all three sites, in which case the final account dispute was a single dispute, and the adjudicator had the necessary jurisdiction; or, as Mr Conway maintains, there were three separate contracts, one in respect of each site, and the dispute was actually three different disputes, being a claim for the sum allegedly due under each separate contract. If that was right, the adjudicator would not have had the necessary jurisdiction.

THE ADJUDICATOR’S FINDINGS AND THE SUBSEQUENT EVIDENCE

The adjudicator’s findings were recorded in paragraph 2.16 of his decision as follows:

“2.16

I issued my non-binding decision on the challenge on 19 October 2015 as follows:

I refer to the jurisdictional challenge, dated 16 October 2015, made by Mohammed Al Haque for and on behalf of Mr Conway and the response by Messrs Dentons, dated 19 October 2015, for and on behalf of PSC Contractors Ltd RSC). I acknowledge receipt of Mr Haque’s further submission on 19 October 2015 by email.

On the evidence adduced before me I understand that during May and June 2012 Mr Conway concluded three contracts with Shaw Interiors Ltd (Shaw) for groundworks at three sites – Walmer Road Notting Hill, London; Middlemas Green, Pewsey, Wiltshire; and Ridge Road, Sutton, Surrey.

In or about November 2012 Mr Conway met Mr Evan O’Rourke, a director of RSC Contractors Ltd, at which meeting they agreed that Mr Conway would attempt to procure construction contracts for RSC in consideration for a fee of £l,500 per week. Mr Conway apparently informed Mr O’Rourke that there was a possibility that he would be able to procure work for RSC using his industry contacts. In fact Mr Conway had already concluded three groundworks contracts with Shaw on his own account.

There is no evidence that the contracts Mr Conway had concluded with Shaw were novated to RSC or that they were assigned to RSC. Therefore, as between Shaw and Mr Conway, Mr Conway was contracted to Shaw to carry out the groundworks on each of the three projects.

In order to fulfil his obligations to Shaw in regard to the three contracts, Mr Conway concluded an oral contract with RSC under which RSC would carry out and complete the groundworks for Mr Conway on each of the projects. The contract works were begun in early 2013 and completed by mid-June 2013.

On the evidence before me, as between Mr Conway and RSC, Mr Conway was in control of the construction works; he gave instructions to RSC in regard to the carrying out of the works; he applied to Shaw for interim payments; he made payments to RSC from monies received from Shaw, deducting as he did so his weekly fee of £1,500.00 in addition to, no doubt, a margin off the rates and prices agreed with Shaw.

On these facts, I do not understand the contract concluded between Mr Conway and RSC to have been an agency contract.

Based on the evidence adduced before me, and the facts as I have found them,’ I am satisfied that the parties entered into a single construction contract under which RSC agreed to carry out and complete groundworks for Mr Conway under his direction for consideration based on rates and prices agreed by Mr Conway with Shaw.

I am further satisfied that a dispute has crystallised in relation to the amount of the final payment due to RSC from Mr Conway, which is a single dispute consisting of more than one issue. One such issue is the amount of any fee that may be due to Mr Conway under the putative agency agreement.

Consequently, it is my non-binding decision that I am clothed with jurisdiction in this matter and shall proceed on the reference accordingly.”

The relevant parts of the subsequent witness statements are as follows:

Mr O’Rourke (RSC)

“10.

I then received a call from Mr Conway on 19 December. He confirmed that he had secured the 3 projects (Ridge Road, Walmer Road and Pewsey) from Shaw Interiors. The work was to start on 7th January 2013 and I agreed to take on the work. We agreed that his nominated quantity surveyor a Mr Jim Wyckham would price the work for us acting on a consultancy basis. I was little involved in the pricing arrangements after that as Mr Conway got the tender documents from Shaw Interiors and passed them to Mr Wyckham to price. He in turn returned them direct to Mr Conway. There was one conversation encompassing all three projects and agreed to do the work on all the projects. We did not discuss picking and choosing some of the projects and leaving others. At the time I trusted Mr Conway and thought he was acting on our behalf. I had no direct contact with Jim Wyckham.

11.

It was therefore as a result of that conversation RSC agree to take on the work for the Shaw Interior projects. My understanding from the conversation is that we had agreed to complete all three of those projects as a single package albeit that the works would need to be broken down to show the cost allocation between each of those projects. In due course we priced bills of quantities for the works…

16.

Once we got to the final account stage the financial claim was dealt with globally. The negotiations began with the final account submissions made on 2 July 2013 which showed that the total amount of work completed on all of the jobs less the payments received gross on all the jobs showing and a net balance due. Obviously in order to understand the claims it was necessary to analyse the breakdown in relation to each site. Again that was the approach taken consistently by the parties. In this regard I refer to Mr Conway’s letter to RSC of 9 September 2013. The opening sentence refers to RSC’s “final account for works completed at the Pewsey and Ridge Road projects.””

Mr Conway

During Mr O’Rourke’s oral evidence there was some, but not much, challenge to those passages in his statement to which I have referred at paragraph 10.1 above. I have of course endeavoured to make every allowance for Mr Conway’s difficulties as a litigant in person. But on a number of occasions during Mr Conway’s cross-examination of Mr O’Rourke, he repeatedly used the word ‘contracts’ when he meant ‘sites’, and it appeared that, for Mr Conway, these two terms were interchangeable. That is a point to which I shall return below. Mr O’Rourke said in evidence to Mr Conway: “You said [on 19 December] we had secured three projects. There was one contract with three projects, three different jobs.”

Mr Conway’s oral evidence was largely concerned with the identification of potentially different documentation relating to the different sites. However, despite paragraph 7 of his statement, to which I have referred to in paragraph 10.2 above, Mr Conway has not been able to refer to a single piece of paper which supported the contention that there were in fact three separate contracts. His oral evidence could be summarised in this way: there were three different sites which generated three different sets of paperwork, so there must have been three different contracts.

ANALYSIS

For the reasons set out below, I have concluded on the balance of probabilities that RSC’s case is to be preferred and that there was one single contract between these parties concerning the three different sites.

First, I found Mr O’Rourke to be an honest and credible witness. He was clear that in the relevant conversation on 19 December 2012 he was told, and he agreed, that there was one contract covering all three sites (paragraph 11 above). I accept that evidence. It seems to me that it was corroborated by the fact that, later on 19 December 2012, he arranged a payment of £10,000 to Mr Conway. The documents show that the money was paid into Mr Conway’s account the following day, 20 December 2012. That was effectively a down payment on the commission which RSC had agreed to pay Mr Conway if he secured them work.

Secondly, on 14 October 2013, Mr Conway served both a payment and payless notice on RSC. That responded to RSC’s single final account claim in respect of the three sites. Mr Conway did not serve three payment notices and three separate payless notices. Again that suggests that there was only one contract. It also runs contrary to Mr Conway’s assertion that the documents for each project were kept separate.

Thirdly, Mr Conway’s previous advisors, Proven Project Solutions, in a letter of 19 December 2014, referred to the overall situation in this case as “a job that was sub-contacted”. That is again consistent with there being a single contract.

Fourthly, I did not find Mr Conway to be an entirely satisfactory witness. He raised matters which were irrelevant, and ran arguments which were not open to him. He repeatedly referred to documents which had not been provided. Most important of all, he had no positive case about the conversation on which Mr O’Rourke relied so heavily, that of 19 December 2012. Indeed, he seemed unable to recall that conversation at all.

Fifthly, I find that, in essence, Mr Conway’s case amounted to no more than the assertion that, because there were three separate sites, and three separate bills of quantity and other valuation documents, there must have been three separate contracts. That point was advanced in the adjudication and recorded in Mr Conway’s formal documents in the adjudication as follows:

“However, following on from paragraph 14 of the purported referral notice there must have been three contracts as each of the three projects/contracts had different obligations. Two of them had different start dates, each finished on different dates as well. Each of them are essentially different in scope, price, duration and variation.”

As I have already noted, that approach could also be seen in the interchangeability of Mr Conway’s use of the words “contracts” and “sites”.

It does not follow that, because there might have been different documentation pertaining to the different sites, there were three separate contracts. That is not the burden of the authorities, neither can that be right as a matter of law. All that matters is whether the parties agreed that there was one contract or three. As I have said, I find on the basis of Mr O’Rourke’s evidence that, on 19 December 2012, it was agreed that there would be one single contract.

CONCLUSIONS

For the reasons set out in Section 5 above, I have concluded that, on the balance of probabilities, there was one contract between RSC and Mr Conway in respect of the three sites at Notting Hill, Pewsey and Sutton. There was a single dispute about what was due under that contract. The adjudicator therefore had the necessary jurisdiction to decide that claim. Since that was the only point which prevented the enforcement of the adjudicator’s original decision on 6 May 2016, it means that RSC are entitled now to the sum sought, together with interest.

In those circumstances, it is unnecessary for me to deal with Mr Fairbairn’s fall-back submission, that Mr Conway agreed that the adjudicator could reach a binding decision on the question of jurisdiction, and so was bound by the adjudicator’s findings set out in paragraph 9 above. Suffice it to say that, not only do I not need to deal with that point, but I consider the law on that topic to be rather uncertain and that, on the face of the documents, it would have been harsh to conclude that Mr Conway did not reserve his position in respect of the adjudicator’s jurisdiction throughout the adjudication.

I regret very much the time and cost that has been wasted on this process, which I consider to be due to the amendments to the 1996 Act. As originally enacted, the 1996 Act would not have permitted this dispute to have been progressed in this way, because Section 107 ensured that it was only when the contract was in writing that adjudication provisions were incorporated. That provision was designed to promote certainty. Section 107 was, in my view, unthinkingly repealed, meaning that (as here) adjudicators have now to grapple with entirely oral contracts, with all the uncertainty and contention that such a situation can engender. In addition, in such cases, even if an adjudicator finds an oral contact, the responding party is likely (as again happened here) to obtain permission to defend a claimant’s claim on enforcement, because only rarely will a disputed oral agreement be the subject of a successful summary judgment application. Thus in this case, the result of the repeal of section 107 has been a process lasting 16 months and the incurring of large sums by way of costs. That is the opposite of the quick, cheap dispute resolution service that adjudication was intended to provide.