| Date | 20 March 2002 |
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| Judgment | RJT Consulting Engineers Limited -v- DM Engineering (NI) Limited, Court of Appeal 8 March 2002 |
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| The Issue | Whether oral contracts may be subject to the provisions of the Construction Act. |
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| Implication |
All the terms, and not merely the existence, of a construction contract have to be evidenced in writing if the contract is to be capable of being referred to adjudication under the Construction Act. |
printOn 8 March 2002 the Court of Appeal gave its third judgment concerning adjudication. This is an important decision because it concerns whether a party to an oral contract may be able to refer disputes to adjudication under the Construction Act. This is particularly important because 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, certain agreements that are not made in writing 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 effect of an oral agreement "is alleged in adjudication proceedings and not denied by the other party in his response". These provisions were bound to cause difficulty, as indeed occurred 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 and DM were the mechanical and electrical sub-contractors. DM approached RJT to undertake design input. A meeting took place between representatives of DM and RJT during which RJT's representative 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. RJT argued that its oral engagement by DM was not an agreement in writing for the purposes of the 1996 Act, and thus the claim for damages could not be decided by an adjudicator. The matter came before the Technology and Construction Court in Liverpool, where His Honour Judge Mackay concluded that it was not necessary that the evidence put forward in support of the agreement should identify all the terms of that agreement. He 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 comprising a number of invoices setting out the nature of the work, the names of the client 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. The adjudication could proceed. The matter has now come before the Court of Appeal where the decision of Judge Mackay has been overturned. It was argued on behalf of RJT that Judge Mackay had confused documents consistent with there being a contract and documents which constituted a record of the entirety of the oral agreement. RJT argued that the whole agreement had to be evidenced in writing in order to provide the certainty which would enable an adjudicator to move swiftly to a decision within the short timetable provided by the Act. DM countered that all that was necessary was that there should be evidence in writing of the existence of a contract. This might be no more than the identities of the parties, the price and the nature of the work to be carried out. Lord Justices Ward and Walker agreed with RJT. The invoices and other extensive evidence found by Judge Mackay was simply evidence of the existence of the contract, but it was not evidence of the terms of the oral agreement between the parties. Neither did these documents provide evidence of the terms of the contract upon which DM relied in the adjudication. In interpreting Section 107 of the Act, what has to be evidenced in writing is literally the agreement, which means all of it, not part of it. The only exception to that generality is where relevant parts of an oral agreement are alleged and not denied in written submissions in adjudication. In a dissenting judgment, Lord Justice Auld accepted that the appeal should be allowed, but noted that in his opinion, what is important is that the terms of the agreement material to the issues giving rise to the adjudication should be clearly recorded in writing. It was not necessary in his view that every term, however trivial or unrelated to those issues, should be expressly recorded or incorporated by reference.
CJ-0211
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