Creative contracts

Consultant James R Knowles will, I suspect, be rewriting the terms on which it provides its services in the future. Come to think of it, all you experts and solicitors might alter your terms as well. Let me tell you why.

First, let me thank solicitor Davis Wallis Foyster of Castle Street, Liverpool, for sending me the judgment in a case called Fence Gate Ltd vs James R Knowles Ltd. It is number 58 in our adjudication cases list. This is what happened.

There is a hotel and restaurant in Burnley called the Fence Gate Inn. They hold seminars there; one is called "How to boost your business through co-operation". The hotel owners decided to carry out construction works, only to be disappointed by some of the builders' work. So they asked James R Knowles to advise them on an alleged defective kitchen floor. Fees were published for this expert advice, and other fees recited if the matter became legal proceedings. And it did. At arbitration, James R Knowles gave expert assistance and expert evidence. Not surprisingly, it issued a fee note. Fence Gate didn't pay.

If the supply of expert services in connection with a construction contract can be classified as an agreement to provide advice on building, then it falls within the Construction Act. That being so, the uncooperative payer can be brought to adjudication. And since James R Knowles was owed, it said, a wad of cash, it did indeed call for the referee. Chris Randle got the job. Fence Gate politely told him to clear off. Its solicitor, Hammond Suddards Edge, explained that the adjudicator had no jurisdiction to do his job because the services of James R Knowles were outside the scope of the act. True, it was advising on everything to do with building and construction, but its expert services in this case were not a "construction contract" as defined in the Construction Act.

The adjudicator reached the conclusion that he had jurisdiction – adjudicators are getting better at understanding this tricky area of jurisdiction. The difficulty for some is that the adjudicator can't or won't let go of the appointment. If they announce that they have no right to adjudicate, their fee-earning prospect goes down the drain. A bit of backbone wouldn't go amiss, sometimes.

Disputes about fees for assisting in arbitration or litigation, even if about construction operations, are contracts for litigation support services

So, the adjudication pressed on and James R Knowles won the game substantially. The adjudicator ordered the hotel owners to pay up. They refused. Instead, they took out a summons in the Technology and Construction Court and asked Judge Gilliland to decide whether James R Knowles had entered into a supply of expert services that came within the act.

The judge explained that a "construction contract" in the act has a defined meaning. There are two limbs. In James R Knowles' case, it satisfied the first limb, which was the supply of advice "on building". But it stumbled on the second limb; it has to be advice on building "in relation to construction operations". It is tempting to say, "of course they were supplying advice about construction operations since a new kitchen floor is just that". But the fact is it was supplying advice not in relation to construction but in relation to legal proceedings. Disputes about fees for being a witness or assisting in arbitration or litigation, even if about construction operations, are not disputes in relation to construction operations; they are contracts for litigation support services.

But what if James R Knowles' services had also included professional advice about the floor before providing advice about arbitration or litigation support, and what if the services came under one professional services contract? The contract is to be treated as severable between those parts relating to construction operations and those relating to litigation/arbitration support services. So James R Knowles could call for the adjudicator for parts of its services and not others.