Carillion Construction Ltd v Devonport Royal Dockyard Ltd 1

United Kingdom

If a variation to the terms of a contract is agreed orally, this must be recorded or evidenced in writing, failing which an adjudicator will not have jurisdiction to decide disputes arising under the oral agreement. There was also no dispute; the defending party had asked for more information about the alleged breach of contract which the referring party had not supplied.

HHJ Bowsher QC, Technology & Construction Court

27 November 2002

D employed C as a sub-contractor. It was agreed that C would be paid its actual cost plus accruals and a fee. There was an agreed target cost, but this was amended several times. On 30 October 2001 representatives of D and C met to discuss revisions to the payment provisions. C believed that it had been agreed that C would be paid on a cost-reimbursable basis without any gain share restrictions.

A dispute later arose concerning C's application for payment. C threatened to go to adjudication. C claimed that the basis of their claim was the oral agreement reached on 30 October 2001. D noted that this was the first time C had sought to rely on such an agreement and sought more information. C responded by serving its notice to refer to adjudication under the Scheme, as the Contract had no provision for adjudication.

The adjudicator decided that a binding agreement was concluded on 30 October 2001 and awarded around £7.5m to C. C sought to enforce the decision. D claimed that the adjudicator had no jurisdiction because the oral agreement was not a construction contract under section 107 of HGCRA as it was not in writing. D also claimed that there was no crystallised dispute since it had not rejected C's claim, but had asked for more information.

The Judge agreed with both of D's submissions. The alleged oral agreement had not been evidenced in writing or been otherwise recorded in writing so it did not fall within section 107. The Judge relied on the Court of Appeal decision in RJT Consulting v DM Engineering, which was authority for the propositions that a contract is not evidenced in writing merely because documents indicate the existence of a contract; and all the terms of the oral agreement must be evidenced in writing or the material terms must be evidenced in writing.

In relation to the no dispute point, the Judge referred to case law for arbitration proceedings and whether disputes had arisen which entitled parties to refer to arbitration. Whilst each case should be considered on its own facts, the Judge noted that in deciding if a dispute has arisen, a broad approach should be taken when looking at the correspondence leading up to the notice of adjudication. Here, D was not aware of how it had not complied with its obligations when C served the notice of adjudication. It had not ignored C's claim, but had asked for more information. Therefore, there was no dispute.

As a result, the adjudicator did not have jurisdiction to consider the dispute and his decision was not enforced.

If a variation to the terms of a contract is agreed orally, this must be recorded or evidenced in writing, failing which an adjudicator will not have jurisdiction to decide disputes arising under the oral agreement. There was also no dispute; the defending party had asked for more information about the alleged breach of contract which the referring party had not supplied.