| Date | 5 September 2001 |
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| Judgment | RJT Consulting Engineers Limited -v-D M Engineering (NI) Ltd, TCC 9 May 2001. |
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| The Issue | Whether oral contracts may be subject to the provisions of the HGCRA 1996. |
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| Implication |
Evidence which supports the existence of an oral agreement, such as invoices or minutes of meetings, will be sufficient to bring the agreement within the ambit of the 1996 Act. |
printIn Contract Journal on 22 March 2000, I reported the case of Grovedeck -v- Capital Demolition, in which the court examined whether an oral contract could be subject to adjudication. Construction contracts are generally complex, and of course it is good practice that such contracts should be formally established by written agreement. However, it is commonplace in the construction industry for substantial work to be undertaken on the strength of an oral agreement. Whilst the oral agreement may be binding between the parties, the difficulty of course lies in determining the precise terms of that agreement in the absence of clear written evidence. It is for this reason that Parliament intended that the provisions of the Housing Grants, Construction and Regeneration Act 1996, should apply only to written contracts. Section 107(1) of the Act states that "The provisions of this Part apply only where the construction contract is in writing, and any other agreement between the parties as to any matter, is effective for the purposes of this Part only if in writing". Had the parliamentary draftsman said no more on this, there would perhaps have been little room for doubt, although it must be accepted that poor management practices in the procurement and placing of construction contracts will always lead to disputes over the prevailing terms of the contract. However, Parliament decided to widen the ambit of the Act, such that, notwithstanding that agreements were not in writing, certain agreements could be caught by the Act. Accordingly, Section 107 qualifies that there will be an agreement in writing, if the agreement is "evidenced in writing", and where the existence of an oral agreement is alleged in adjudication proceedings and not denied by the other party. These provisions were bound to cause difficulty. In Grovedeck, Judge Bowsher held that contracts between the parties made orally in the first instance, could not be deemed by statute to be contracts in writing, merely because there had been written submissions made in adjudication proceedings. More recently, this matter has come before the courts in the case of RJT Consulting Engineers Ltd -v- D M Engineering (NI) Ltd. The parties were concerned with a project for the refurbishment of the Holiday Inn in Lime Street, Liverpool. RJT were mechanical and electrical consulting engineers engaged by the hotel. DM were the mechanical and electrical sub-contractors. DM were under an obligation to complete the design of parts of the mechanical engineering work and, in an attempt to simplify matters, approached the hotel's consulting engineers, RJT, to undertake the design input on its behalf. A meeting took place between representatives of DM and RJT during which the RJT's representatives agreed that it would undertake the design work for a fee of £12,000. The parties accepted that an oral agreement had been made. A dispute arose, however, concerning the performance of that agreement. DM commenced an adjudication against RJT, in which it claimed damages of £858,000 for alleged professional negligence on the part of RJT. RJT argued that its oral engagement by DM was not an agreement in writing for the purposes of the 1996 Act. The adjudicator investigated this issue and indicated that he considered that the agreement between the parties, although oral, had been subsequently "evidenced in writing" and was therefore caught by the Act. RJT therefore applied to the court for a declaration that the agreement was not an agreement in writing and was therefore excluded from the provisions of the Act. DM argued that the terms of Section 107 are a widening process. Where the Act provides that it will apply to a contract "evidenced in writing", this leaves the door open for such evidence to come into existence after the commencement, or even the completion, of the performance of the contract. Thus, argued DM, an invoice submitted by one party to the other may be sufficient evidence, as might the confirmation of a verbal instruction. Such documents would make an oral contract an "agreement in writing" for the purposes of the Act. RJT countered that in Sections 108 to 113, the Act brings in a whole host of requirements which would be entirely inappropriate to it and inappropriate to a contract which is not evidenced in writing. RJT argued that for an oral agreement to be "evidenced in writing", the evidence must amount to a recitation of the terms of the agreement. Merely a reference to the agreement, a reference to the parties, a reference to the place, or a reference to the people who carry out the work, is not enough. His Honour Judge Mackay noted that the actual material between the parties by way of written substance was comparatively great. He noted, for example, that there was a fee account from RJT to DM on a number of invoices setting out the nature of the work, the names of the clients and the identity of the place of work. Minutes of meetings were also put forward in evidence, which identified the parties and the nature of the work being carried out. Judge Mackay concluded that it was not necessary that the evidence put forward in support of the agreement should identify the terms of the agreement. The extensive documentary evidence in this case was sufficient to bring it within the adjudication proceedings. Accordingly, the declaration sought by RJT that the agreement was not an agreement in writing for the purposes of the 1996 Act, was refused.
CJ-0135
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