Management Solutions & Professional Consultants Ltd v Bennett (Electrical) Services Ltd

For the purposes of section 107 of the Housing Grants, Construction and Regeneration Act 1996, oral instructions given under an existing written construction contract do not necessarily make the contract partly oral. Where the written contract authorises variations, work instructed within that contractual framework remains work performed under the original written contract. An adjudicator therefore retains jurisdiction where the contract is sufficiently evidenced in writing.

Where a written document appears to constitute a construction contract, a challenge that it does not contain the terms applicable to the dispute is ordinarily a matter for the adjudicator and does not retrospectively deprive the adjudicator of jurisdiction. Contractual effect is assessed objectively.

The parties were involved in two separate construction sub-sub-contracts and two adjudications. In the first, the adjudicator awarded Management Solutions sums for unpaid work, including orally instructed variations. Bennett challenged enforcement on the ground that the oral instructions meant the contract was not wholly in writing for the purposes of section 107 of the Housing Grants, Construction and Regeneration Act 1996.

In the second adjudication, the adjudicator awarded Bennett the additional cost of completing works after Management Solutions stopped work. Management Solutions argued that no written contract had been formed, or that the written documents did not contain the complete agreement. The court had to determine whether either adjudicator lacked jurisdiction and whether the awards were enforceable.

1. Management Solutions’ adjudication. The original sub-sub-contract was contained in written documents. Its terms authorised Bennett to vary the scope of the work. Oral instructions made within those contractual limits were instructions under the existing contract, rather than variations which altered the character of the contract. The contractual requirement for written variations could also be waived by agreement. The adjudicator therefore had jurisdiction under section 107 of the Housing Grants, Construction and Regeneration Act 1996, and the first decision was enforceable. The court considered the reasoning in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] 1 BLR 217, but distinguished its application to a contract containing an operative contractual variations mechanism.
2. Bennett’s adjudication. The purchase order and subsequent invoices constituted or evidenced a written construction contract. Where documentation appears on its face to constitute such a contract, an argument that an earlier oral agreement governed the dispute is a matter within the adjudicator’s jurisdiction. Any error in deciding that issue does not ordinarily invalidate the adjudicator’s jurisdiction. In any event, the earlier oral contract could have been discharged and replaced by the later written agreement.
3. The absence from the documents of a commencement date, a complete description of the works, or a breakdown of the lump sum did not prevent a construction contract from arising. A reference in the purchase order to written standard terms was sufficient for incorporation under section 107(3). Whether the invoices had contractual effect was determined objectively, and a reasonable person would regard them as accepting the purchase order.
4. Judgment was entered for Management Solutions for £41,908.48 and for Bennett for £26,340.18, with interest at 4.5 per cent. The sums were set off, leaving Management Solutions to recover £15,568.30 plus interest from 25 January 2006. Each party was ordered to bear its own costs.