The write stuff

If ever there was a strong case for paying close attention to section 107 of the Construction Act, that of Mast Electrical Services and Kendall Cross Holdings is it.

Mast Electrical Services tendered for electrical works on documents received from Kendall Cross Holdings. Later, Mast issued a revised tender on the basis of a schedule of rates. This was in principle accepted by Kendall which, by letter, instructed Mast to proceed with initial surveys to the properties.

Following the surveys, Mast submitted a third and final tender, and then correspondence passed between the parties.

Mast duly carried out and completed the electrical works. However, the parties were in dispute over payment and over the question of what rates, if any, had been agreed.

Adjudication

Mast began adjudication, which Kendall defended on a number of grounds, one of which was that there was no contract in writing and therefore the adjudicator lacked jurisdiction.

The adjudicator acceded to that submission and resigned his appointment. The reason given by the adjudicator was that the rates within the original tender were different to the rates submitted in one of the later tenders.

Accordingly, without certainty as to the price, there could be no agreement between the parties.

Court proceedings

In order to establish its entitlement to adjudicate, Mast began court proceedings against Kendall.

Mast sought declarations that the subcontract arrangement constituted a contract in writing for the purposes of section 107 of the Construction Act.

Mast would have been entitled to refuse to start work before all contractual terms, in particular those applying to payment, had been agreed

In order for Mast to obtain the benefit of the adjudication provisions of the act, it had to establish not only that there was a subcontract but also that the subcontract satisfied the requirements of section 107.

Mast contended that Kendall, by its letter, accepted its second tender and that, as it was simply a matter of applying the rates to the quantities of work carried out, there was enough certainty as to price in the documents passing between the parties.

In the alternative, Mast asserted that the third tender was accepted by Kendall’s conduct because the rates in this tender formed the basis of Mast’s interim applications, which were paid by Kendall.

Kendall argued that there were substantial differences between the rates attached to the third tender and the rates attached to the second tender, and therefore for lack of certainty there was no contract.

Of the three tenders, the judge considered that only the third tender was relevant, on the basis that it revised and superseded the preceding ones. He also found little evidence that the applications were dealt with on the basis of the rates in the third tender.

The judge concluded that the documents did not set out, evidence or record any agreed rates of payment for Mast’s work, and that it was probable that there was no contract at all.

This meant that the documents relied on by Mast did not satisfy the requirements of section 107.

Lesson

From when the parties were first in dispute over payment to the date of the court judgement, it took six months for the court to come to a similar conclusion to the adjudicator’s – Mast had no entitlement to adjudicate.

Mast would have been entitled to refuse to start work before all contractual terms, in particular those applying to payment, had been agreed.

It is unfortunate for Mast that this did not happen, and so Mast was unable to take advantage of the adjudication procedure in respect of its claims for payment.