Doing the twist

The redevelopment of the old Wellesley Hotel in Leeds as residential apartments has ended in tears. Galliford UK (now Galliford Try Construction) took on the design-and-build contract. Post-tender structural engineering work was then required; that's where consulting engineers Michael Heal Associates enter the scene. Problems eventually cropped up on the steelwork. Galliford blamed Heal and an adjudication took place. Galliford was awarded upwards of £750,000 in damages against Heal.

Heal wouldn't pay. Galliford came to the High Court to enforce the decision. Now the arguments get a bit complicated. The punchline, however, is that the court would not enforce the adjudicator's decision. And the court gave Galliford a sharp dig in the ribs. The arguments: Heal said Galliford and Heal had not made a contract at all. The adjudicator therefore had no jurisdiction. Alternatively, if a contract was made, it was not in writing and therefore not subject to adjudication. Wrong, says Galliford, but even if it was correct, the solicitors acting for the two parties had agreed to adjudicate anyway. Wrong, says Heal. Heal went on to say that the claim by Galliford (the pleaded case) stated that the 1998 ACE Standard Form Contract for Consulting Engineers applied and indeed that's what the adjudicator based his decisions on. But in the enforcement trial, Galliford changed its tune.

It said that the 1998 ACE form didn't apply! In those circumstances, said counsel for Heal, no dispute could have arisen in the adjudication as to whether the 1998 form was breached. Wrong, says Galliford: once an adjudicator decides the pleaded case, it was irrelevant that Galliford later recognised that the claim it made in the adjudication was in truth unsustainable.

The judge decided that there was no contract between Galliford and Heal. The reason was that too many things were left uncertain. The uncertainty arose because Galliford had not yet itself entered into the main contract.

All the key cases in the past have emphasised that the adjudicator has not gone wrong, provided he answered the question he was asked

As to the next point of whether the contract was in writing, the answer was obviously no.

As to whether the two firms of solicitors had consented to adjudicate irrespective of this, the answer was yes, they had. But what had been agreed to? The parties were taken to have agreed to adjudicate on the basis that they had entered into a contract as defined by the Construction Act, which included that 1998 ACE form.

And now comes a crucial point. What happens now that the successful party no longer contends for the contract containing the terms which the adjudicator found Heal was in breach of? Does it matter? Is the decision nevertheless binding and enforceable in the court? Heal's barrister said that the dispute about the breach of terms in the 1998 form never really existed. That doesn't matter, said the barrister for Galliford. All the key cases in the past have emphasised that the adjudicator has not gone wrong, provided he answered the question he was asked. The heart of the question asked was whether Heal was liable in damages to Galliford and he had answered "yes". Case law says that the adjudicator derives his authority from the dispute referred. Go beyond that and there is no authority. Be that as it may, the difference here is that Galliford has subsequently changed and abandoned the contention that the contract upon which it succeeded in the adjudication was ever made.