Adjudication
RJT Consulting Engineers Ltd v DM Engineering (NI) Ltd

© Daniel Atkinson 2001    24 July 2001

The issue in RJT Consulting Engineers Ltd v DM Engineering (NI) Ltd (2001)CTC was whether or not an oral agreement between the parties was an agreement in writing as defined by Section 107 of the Housing Grants Construction and Regeneration Act 1996. There has been no previous decision on this issue.

DM were mechanical and electrical subcontractors in connection with the refurbishment of the Holiday Inn in Liverpool. RJT is a practice of consulting engineers and in this case were consultants to the Hotel. At a meeting in April 2000 DM asked RJT to complete the design of some of the mechanical engineering works and agreed a fee of £12,000.

DM commenced an adjudication claiming damages in excess of £858,000 for alleged professional negligence on the part of RJT for the work carried out. There was no dispute that the actual agreement was an oral agreement, but RJT objected to the jurisdiction of the adjudicator on the grounds that there was no agreement in writing for the purposes of the 1996 Act. the adjudicator investigated his own jurisdiction and determined that the agreement was evidenced in writing and therefore caught by the Act. RJT then applied to the Courts for a declaration that the agreement was not evidenced in writing.

RJT argued that whilst there may be documentation that evidenced some agreement was made, the terms of the agreement were not in writing. They argued that it would be inappropriate to apply the procedures of the Act to such an agreement.

DM on the other hand argued that Section 107(2)(c) allowed evidence to come into existence after the commencement, or even the completion, of the contract’s performance. Thus an invoice submitted by one party to the other may be sufficient evidence, as might a confirmation of verbal instructions set out in the letter. DM argued that the Court can look at all the written evidence to determine whether or not that evidence is capable of supporting the existence of an agreement between the parties. Nowhere in the Act, DM said, was it stipulated that the substance, material consideration, terms or quantities of the contract must be set out in writing. If an agreement was capable of coming within sub-section 2(a) because it is endorsed on the back of a scrap of paper, it was nonsensical that an oral contract which may come within sub-section (c) required greater particularity of terms. DM also referred to the terms of sub-section 5 of Section 107 where a party can be caught by the Act if it does not deny the allegation that there was an agreement during adjudication proceedings.

RJT argued that at the end of Section 107(5) are the words "to the effect alleged." There must be a recitation of the terms of the agreement for it to be caught by the 1996 Act. Merely a reference to the agreement, a reference to the parties, a reference to the place, a reference to the people who are to carry out the work was not enough.

His Honour Judge Mackay examined the actual written material between the parties. 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 the work. There were minutes taken during meetings between the experts when the work was to be carried out which clearly identified the parties and the nature of the work which needed, at those particular times when those minutes were made, to be done.

Judge Mackay used a purposive approach. He examined what the Act was meant to do and what the Act was trying to do. He held that it was not necessary to have the terms identified and the extensive documentary evidence in this case was well sufficient to bring it within the adjudication proceedings. It was contrary to the Act to require a recitation of the terms of an agreement when the existence of the agreement, the parties to the agreement and the nature of the work and the price of the agreement were plainly to be found in documentary form. In a contract worth more than three-quarters of a million pounds it would be contrary to his duty to carry out the law to hold that simply because the initial agreement was oral, it was not caught by the Act. Judge Mackay therefore refused the declaration.

That disposed of the substantive issue, but what of the adjudication. It appears that the parties agreed that the adjudication would not proceed awaiting the decision of the Court of Appeal on this important issue for the industry. Of course that decision may take some time.