The contract scrum

Michael John Construction was engaged as building contractor to construct a bespoke sports complex at St Peter's Rugby Football Club at Roath, in Cardiff. The Employer was named in the contract as "St Peter's RFC". As such, ‘The Club' was an unincorporated association of individuals with no separate legal identity or status.

In early 2005 the Club failed to make certain payments due under the contract and the contractor referred the matter to adjudication. The contractor named Mr Matthews and Mr Norman, the current trustees of the club, as the responding parties. The adjudicator concluded that the sums were in fact due and proceeded to find Mr Matthews and Mr Norman jointly liable for £122,522. Neither Mr Matthews or Mr Norman, or any member of the club for that matter, paid the sum found due by the adjudicator.

Shortly thereafter, the contractor discovered that, whilst Mr Matthews' signature was on the contract, neither Mr Matthews or Mr Norman were in fact trustees at the time the contract was signed. The trustees at the time were Mr Golledge, Mr Childs and Mr Carpanini. The contractor wrote to the three former trustees requesting payment against the adjudicator's decision. They refused to be bound by the decision and so the contractor launched a second adjudication against the three previous trustees and Mr Matthews.

The three previous trustees and Mr Matthews claimed that the entire club (i.e. all of its individual members) were liable and should be cited in the referral. After dealing with the barrage of challenges to his jurisdiction advanced by the four respondents, the adjudicator proceeded to find the four individuals liable for the sum of £134,343. Once again, none of the respondents paid the sum found due by the adjudicator.

The contractor, now clearly exasperated with the situation, commenced proceedings in the Technology and Construction Court for enforcement of the adjudicator's decisions and the case was brought before His Honour Judge Peter Coulson QC.

The Judge promptly dispensed with the club's jurisdictional challenges and soon came to what he referred to as the ‘central legal issue' of ‘who was the appropriate party or parties against whom the adjudication should have been commenced?'. He found that the club was not a separate legal entity and only individuals could be pursued. However, he rejected that each and every member of the club must be individually or collectively cited, finding that: "A trustee who enters into a contract will generally be personally liable under the contract, like other contracting parties. Subject to any contractual limitations on a trustee's liability - and here there were none - his personal liability will be unlimited."

He went on to consider the role of Mr Matthews in signing the contract and found that he was also personally liable to the contractor as an agent of the trustees. In finding either the trustees or the agent liable he offered the contractor the choice: would you like enforcement against the trustees or their agent? The contractor elected for the trustees.

The Judge duly upheld the adjudicator's second decision against the three former trustees for the full sum plus further interest.

This case demonstrates the importance of knowing who is ultimately accountable under the contract. It took over a year for the contractor to be acquainted with his money in this relatively straightforward payment issue. Remember, a contract is a commercial marriage. Blind dates are one thing but you wouldn't go on a blind wedding, would you?