Hillcrest Homes Ltd v Beresford and Curbishley Ltd

A JCT adjudication clause permitting referral of disputes arising under the contract does not extend to a claim for damages under Misrepresentation Act 1967. A referral may nevertheless contain a contractual dispute and a separate non-contractual dispute, capable in principle of severance. An adjudicator breaches natural justice by deciding a material issue on a legal basis which neither party advanced without giving the parties an opportunity to respond. A novation contemplated by contractual documents to occur on execution of the building contract is not effective when a party executes the deed only after practical completion, where that party never consented to the materially later novation.

Hillcrest Homes Limited, a property developer, engaged Beresford and Curbishley Limited to design and construct a residential development under a JCT design and build contract. The Employer’s Requirements contemplated the novation of Hillcrest’s structural engineer, Howard Taylor Associates, to the contractor on execution of the building contract.

Howard Taylor later executed a novation deed, but only after practical completion. B&C commenced adjudication alleging negligent misstatement, seeking damages under Misrepresentation Act 1967, and challenging the effectiveness of the novation. The adjudicator upheld the misrepresentation claim and declared the novation deed void. Hillcrest challenged the adjudicator’s jurisdiction, the referral of more than one dispute, the natural justice of the decision, and sought final declarations concerning novation.

1. Adjudication jurisdiction. Article 7 of the building contract permitted referral only of a dispute arising “under this Contract”. The claim for damages under section 2(1) of the Misrepresentation Act 1967 arose under the Act, not under the contract. The adjudicator therefore had no jurisdiction to determine it. The broader reasoning in Fiona Trust v Privalov [2007] 4 All E.R. 951 did not govern because the clause concerned adjudication and used materially narrower wording than the arbitration clause.
2. Multiple disputes. The referral contained two discrete disputes: entitlement to misrepresentation damages and whether an effective novation had occurred. The latter arose under the contract. The declarations concerning novation were theoretically severable from the declarations concerning damages, although the point was academic because the novation declarations were separately unenforceable.
3. Natural justice. The adjudicator declared the deed void because it did not accurately reflect the appointment contemplated before the contract. That basis had not been advanced by either party. It was material and decisive, and Hillcrest had no opportunity to address it. The declarations that the deed was void and that the services had not been novated were therefore unenforceable.
4. Damages claim. Referring a dispute outside Article 7 was not itself a breach of contract. No term prohibiting such a referral was necessary to give the contract business efficacy or obvious from the agreement. Hillcrest, having participated in the adjudication after taking its jurisdictional objection, remained liable for the adjudicator’s fees.
5. Novation. Properly construed, the Employer’s Requirements required execution by all three parties of the deed in the form of Appendix F, on execution of the building contract. B&C had not consented to a materially later novation after practical completion. It was entitled to assume that Hillcrest had secured HTA’s agreement, was not obliged to procure it, and was not in breach by refusing to sign. No estoppel arose. Hillcrest was entitled to none of the final declarations.