Aqua Leisure International Ltd v Benchmark Leisurel Ltd

An agreement expressly made subject to contract and without prejudice will not normally become binding merely because the parties act upon it. Payments, performance of works and accounting for sums already due do not, without more, establish a new binding compromise. The question is whether, in all the circumstances, the parties agreed to waive the requirement for a formal written contract.

An adjudicator has no jurisdiction to award costs or fixed payments under the Late Payment of Commercial Debts (Interest) Act 1998 where the statutory requirements for a contractual costs provision are absent. A fundamental statutory absence of jurisdiction cannot be waived by participation in the adjudication.

The claimant sought summary judgment to enforce an adjudicator’s decision requiring the defendant to pay sums arising from a construction contract. The defendant argued that the adjudication award had been superseded by a later settlement agreement reached during negotiations, and that the adjudicator had lacked jurisdiction to award costs under the Late Payment of Commercial Debts (Interest) Act 1998.

The negotiations were expressly stated to be “without prejudice and subject to contract”. A written settlement and guarantee were contemplated but never executed. The central issues were whether the parties had nevertheless entered into a binding compromise and whether the defendant had waived its jurisdictional objection to the adjudicator’s costs award.

1. Summary judgment. The defendant had to show a real prospect of establishing at trial that the parties had agreed to enter into a binding contract without reducing all terms to writing. The approach in RTS v Molkerei [2010] 1 WLR 753 required consideration of all the circumstances. The agreement was expressly subject to contract, and the parties’ conduct did not demonstrate any waiver of that condition. Payments made were referable to pre-existing contractual and adjudication liabilities. The warranty works and later payments likewise did not establish a new compromise. Summary judgment was therefore entered for the claimant on the adjudication sums.
2. The claimant’s alternative argument concerning the proposed Abbey guarantee was not finally determined. Had the compromise otherwise been binding, there was a reasonable prospect that the issue whether Abbey had agreed to be bound would have required trial.
3. Adjudicator’s costs award. Following Enviroflow v Redhill [2017] EWHC 2159 (TCC), the adjudicator had no jurisdiction to award costs or the fixed payment under the 1998 Act. The implied contractual term relied upon by the Act was rendered ineffective by section 108A(1) and (2) of the Housing Grants, Construction and Regeneration Act 1996, and no compliant written agreement existed.
4. The objection was one of fundamental statutory jurisdiction, rather than a procedural defect capable of waiver. The statute prevented the parties from overriding the position by agreement or conduct. The defendant’s participation therefore did not waive the objection. The court could determine the point at the enforcement stage; alternatively, it was sufficiently short and self-contained to be decided without Part 8 proceedings. The costs element of the adjudicator’s award was not enforceable.