Aceramais Holdings vs Hadleigh Partnerships: Contracts in writing

The facts

This action relates to building work carried out at Wellington Square, Cheltenham. Aceramais Holdings (“Aceramais”) owned the site and was the vehicle for the development project. Hadleigh Partnerships (“HP”) was involved in the development of the site. HP was owned by Mr and Mrs Grant.

HP served on Aceramais a notice to adjudicate. Aceramais claimed that there was no contract in writing within the meaning of section 107 of the Housing Grants, Construction and Regeneration Act 1996 (“the act”) so the adjudicator had no jurisdiction. Aceramais then issued proceedings seeking a without notice injunction to prevent the adjudication proceeding. The adjudicator proceeded, but Aceramais did not participate. The adjudicator decided that Aceramais owed HP about £800,000. This was not paid.

Aceramais contended that it agreed with Mr Grant that Aceramais would purchase the site, Mr Grant would carry out the devolvement at cost and any profit from the development would be split 50:50. It was an agreement between Aceramais and Mr and Mrs Grant and it was not reduced to writing. HP claimed that it and Aceramais contracted on the JCT 2005 Design and Build standard form of building contract dated 14 March 2008.

The issues

There were three issues before the court. First, was there a contract in writing? Second, should the claim be struck out on the basis that Aceramais did not comply with a disclosure order of the court? Finally, should a declaration be made in the circumstances?

The decision

A JCT form of contract existed, but it was only signed by HP. It was clear that the Royal Bank of Scotland (“RBS”), who was the funder of the development, and Bond Davidson who was engaged by RBS to monitor the project, wanted a JCT contract in place. They chased throughout material periods for contract documentation to be completed. There were repeated reminders that the contract documentation had not been implemented. Aceramais did not raise queries in respect of the JCT document. It was not retuned but Aceramais did not deny its relevance or validity.

Furthermore, Aceramais' solicitor was copied into messages regarding the project that clearly showed HP's position was that a JCT form had to be sent to Aceramais for signature and that HP considered that that was the basis on which they had contracted. This reinforced the clear impression that Aceramais had agreed that the formal requirement was for a JCT contract.

It was then argued that the agreement was incomplete on the grounds that the document contained terms that were never agreed. This argument was not accepted by the court. It was advanced at a very late stage and Aceramais did not identify what matters they disagreed with and did not challenge the detail set out in the documents at the time of termination. It was held that although the JCT contract was not signed by Aceramais, the document clearly fell within the provisions of section 107(2)(a) and (c) of the act and within the guidance given in RJT Engineers vs DM Engineering (Northern Ireland).

HP claimed that the claim should be struck out by reason of Aceramais' failure to comply with the terms of a disclosure order. It became clear that Aceramais did not have a clear understanding of the rules of disclosure and it failed to disclose a number of documents that may have been of assistance in this case. The court took a serious view of this. The duty to disclose was necessary for a fair trial and the making of a disclosure statement by an appropriate person was necessary to ensure that the obligation of disclosure had been complied with. The consequence of that failure was that the claim was struck out.

Given the very limited nature of the relief sought by Aceramais, it would have been a quicker and cheaper process if it had waited until the outcome of the adjudication and challenged the decision on the ground that there was no contract in writing, instead of following this path. The court was cautious about making binding decisions on factual matters that may be the subject of later proceedings.

Comment

Despite the substantial amount of time and money that the parties must have spent in preparation before trial, the court was asked to decide only a very narrow issue. There was a disproportion between the effort that was put into the proceedings and the necessarily limited nature of the court's conclusions. It will only be appropriate in rare cases for the TCC to intervene in a continuing adjudication. It is important that, wherever possible, the adjudication process is allowed to operate free from the intervention of the court where possible.

This was not a rare or exceptional case. The question whether there was a contract in writing and thus whether the adjudicator had jurisdiction was common place and should have been raised at enforcement.