Stratfield Saye Estate Trustees v AHL Construction Ltd

This judgment is in six parts, namely, part 1: introduction, part 2: the facts, part 3: the present proceedings, part 4: was there a contract for a defined scope of work? Part 5: was that contract an agreement in writing within the meaning of section 107 of the Construction Act? Part 6: is the decision of Mr Wakefield a valid and enforceable adjudicator's award?

Part 1: Introduction

This litigation arises from a dispute between the Trustees of the Stratfield Saye Estate and a building company. The trustees of the Stratfield Saye Estate appear as claimant in the present litigation but have been the respondents in three previous adjudications. I shall refer to this party as "the Estate". The building company was originally called Abbot Hill Lyons Limited but has changed its name to AHL Construction Limited. This company has been the claimant in all three adjudications but is defendant in the present litigation. I shall refer to this party at "AHL".

The various disputes between the parties all arise out of a project to restore a large derelict property belonging to the Estate called Heckfield Wood House. AHL started work on this project on 8 September 2003 but were ordered to stop work on 16 September. The financial claims arising from that episode have generated three adjudications and now the present action in the Technology and Construction Court. In this judgment I shall refer to the Housing Grants Construction and Regeneration Act 1996 as "the Construction Act".

It may be helpful if at this stage I introduce the key individuals who feature in the story. Mr Graham Tongue was employed as agent by the Estate from 7 August 1990 until 30 September 2003. Mr Paul Sedgwick became employed as agent by the Estate on 4 August 2003 and remains in that position today. Thus it can be seen that the events giving rise to the present dispute occurred during the handover period when the Estate had two agents and when Mr Sedgwick was taking over the reigns from Mr Tongue.

Mr Glover is a chartered building surveyor whose practice involves building surveying services in relation to a wide variety of construction work including new developments, refurbishments and modifications to existing structures. He deals with most aspects of the construction process, such as the preparation of plans and specifications, building regulation approvals, planning permissions, the selection of contractors, negotiating contracts and administering construction contracts. Mr Glover has provided building surveying services to the Estate in relation to various projects over a period of about seven years. One of the projects which Mr Glover handled on behalf of the Estate concerned Heckfield Wood House.

Let me now turn to AHL. AHL is a building company with two directors. They are Mr Trevor Hill and Mr Graham Lyons. Mr Lyons was the director who handled all negotiations leading up to AHL commencing work on 8 September 2003. Mr Hill was the director responsible for overseeing construction operations after that date.

During the course of this trial I have heard evidence from Mr Glover, Mr Tongue, Mr Sedgwick and Mr Lyons. I found all four witnesses to be entirely honest. They are responsible, professional people who were doing their best to assist this court in a fair and nonpartisan manner. Of course, on some matters their recollections differed. This is unsurprising since the events in question occurred over a year ago. Moreover, all of them are busy people who have other matters to attend to in addition to this particular building project.

Counsel for the Estate is Mr Robert Clay, counsel for AHL is Mr Stuart Kennedy. I am grateful to both counsel for their clear skeleton arguments and for their concise and effective advocacy. Having dealt with these matters by way of introduction, I can now turn to the facts of the case.

Part 2: The facts

For some years the Estate was owner of a derelict property called Heckfield Wood House. In 1997 Mr Tongue as agent for the Estate engaged Mr Glover to prepare plans and specifications for renovating the property. Work did not proceed at that time.

During 2003 the Estate decided to carry out works to Heckfield Wood House which would make the property wind and weathertight. This would enable various temporary protective coverings around the property to be removed. In June 2003 Mr Tongue told Mr Glover that the Estate wanted to proceed with works to make the building wind and watertight. Mr Tongue stated that the Estate could spend on these works no more than £150,000 excluding VAT and professional fees. In discussions between Mr Tongue and Mr Glover the works which were planned for 2003 were referred to as "phase 1".

Mr Glover discussed the project with a local builder, Mr East. On 9 July Mr Glover sent to Mr Tongue his budget costs for the phase 1 works. These amounted to £214,500 exclusive of VAT and professional fees. On 30 July Mr Tongue telephoned Mr Glover. According to Mr Glover's oral evidence, which I accept, in that telephone conversation Mr Tongue told Mr Glover to go ahead and get the works started. Mr Tongue's evidence was somewhat different, however. Both Mr Glover and Mr Tongue are witnesses called by the claimant. Mr Tongue was much less certain about these matters where his recollection differed from that of Mr Glover.

Following the telephone conversation of 30 July Mr Glover made arrangements for Mr East to start work. Unfortunately, however, Mr East had to withdraw owing to family difficulties. In late August 2003 Mr Glover approached AHL. On 28 August Mr Glover and Mr Lyons met on site. Both men have a similar recollection of this meeting. At the meeting negatives of the four drawings, which are now pages 154 to 157 of bundle 1, were examined. Mr Glover explained that his clients required the phase 1 works to be carried out. The phase 1 works consisted essentially of those works which were required to make the building wind and weathertight. The drawings showed certain further works which were not essential for making the building wind and weathertight. Both men appreciated that these further works might be excluded from phase 1 despite being shown on the drawings.

Mr Glover proposed that AHL should carry out the works on a "cost plus" basis. Mr Lyons said that AHL would be happy to proceed on this basis subject to agreeing rates. At the end of the meeting both men expected the work to be awarded to AHL, but no firm agreement was reached. During the course of the meeting Mr Glover did not tell Mr Lyons about the cost limit of £150,000 which had been imposed by the Estate.

There then followed some negotiations about rates. Mr Lyons wrote three letters to Mr Glover quoting progressively lower figures. Mr Lyons' third letter was dated 2 September 2003. In this letter Mr Lyons proposed rates for site foreman, tradesmen, carpenters and bricklayers, M and E tradesmen, plumbers and electricians, labourers, pick-up truck driver and specialist tradesmen. Mr Lyons also proposed that plant and materials should be charged at cost plus 10 per cent to cover overheads and profits. Mr Lyons said that his company would require some site accommodation, storage and a site toilet and these would be charged at cost plus 10 per cent. He added that VAT would be added to these figures. He said that their foreman would be Mr Mark Busby, a very experienced bricklayer. Mr Lyons went on to say that his company's surveyor would submit weekly details of labour, plant and materials used on the contract and would appreciate two weekly invoicing on the contract.

Mr Glover was minded to write to Mr Lyons accepting these rates and instructing AHL to proceed on this basis. Before doing so, however, he telephoned Mr Tongue and Mr Tongue told him to go ahead. In the course of this conversation Mr Glover told Mr Tongue that work would start on 8 September and that there would be a site meeting on that day. Mr Glover wrote to Mr Lyons on 2 September 2003 as follows:

"Heckfield Wood House repairs and improvements, phase 1.

Further to our meeting on site and discussion concerning the above project and your subsequent letter confirming your rates, I am pleased to be able to confirm your appointment to carry out the first phase of the above works. The contract will be a cost plus contract and you will be paid as follows: foreman £31 per hour, mason/carpenter £25 per hour, M and E tradesmen £25 per hour, labourer £20 per hour. Plant will be as follows: pick-up truck driver £30 per hour. Materials, plant, skips and other direct costs, including site accommodation, will be paid at cost plus 10 per cent. You will be expected to keep full timesheets for the labour for each man each day, stipulating the element of work they have been engaged in and materials invoices to support the valuation at the end of each month.

"Water, electricity and telephone are on site but temporary connections will need to be made by yourselves. You are to start on … and I will meet you there on that day to agree a programme for the first month's work. I enclose a key for the padlock to the gate and fencing. I expect you to have a minimum of three men on site at all times. Please arrange for the following to be put in hand immediately prior to the above date: CIS certificate to be ready for presenting to the Estate,...