RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd

For a construction contract to qualify as an agreement evidenced in writing under section 107 of the Housing Grants, Construction and Regeneration Act 1996, the writing must record the contractual terms, rather than merely establish the contract’s existence, parties, work and price. The majority held that the agreement as a whole must be evidenced in writing. Section 107(5) provides a specific exception where written submissions allege an oral agreement and the opposing party does not deny it.

The requirement provides the certainty needed for adjudication’s swift and summary procedure. Once a qualifying written contract exists, however, an adjudicator may determine whether a disputed term was incorporated into it.

A consulting engineer orally agreed to complete the detailed design of mechanical and electrical works for a subcontractor. The subcontractor later referred claims for professional negligence and breach of contract to adjudication. The engineer contended that Part II of the Housing Grants, Construction and Regeneration Act 1996 did not apply because the consultancy agreement was not in writing.

The adjudicator found sufficient written evidence in drawing schedules and correspondence. His Honour Judge MacKay, sitting as a deputy High Court judge in the Technology and Construction Court, dismissed the engineer’s application for a declaration but granted permission to appeal. The central issue was whether section 107 required written evidence merely of a contract’s existence and essential substance, or of its contractual terms.

1. Appeal allowed unanimously. Ward LJ, with whom Robert Walker LJ agreed, held that section 107 required the agreement itself to be evidenced in writing. Evidence merely showing the contract’s existence, parties, general work and price was insufficient. The statutory language and structure required a record of the agreement’s terms.

2. Sections 107(2) to (4) contemplated written material containing or recording the whole agreement. Section 107(5) created a specific exception. Written submissions alleging an oral agreement, where the allegation was not denied in the response, constituted an agreement in writing to the effect alleged. That exception did not control the construction of section 107 as a whole.

3. The writing requirement served certainty. Adjudication under the Housing Grants, Construction and Regeneration Act 1996 was designed as a rapid, interim and binding process. An adjudicator therefore needed a sufficiently certain written foundation identifying the contractual terms from which the dispute arose.

4. The documents relied upon recorded professional fees, the identities and connections of the parties, and a general design or advisory role. They did not record the terms of the oral consultancy agreement, including the terms upon which the subcontractor based its adjudication claim. They therefore failed to satisfy section 107.

5. Auld LJ agreed with the disposition but adopted a narrower construction. In his view, section 107 required the terms material to the issues referred to adjudication to be recorded in writing, rather than every trivial or unrelated term. He nevertheless concluded that the material terms in this case were insufficiently recorded.

6. The court declared that the oral construction contract was not an agreement in writing for section 107 and that Part II of the Act did not apply. The respondent was ordered to pay the appellant’s costs of the appeal and action, including the application costs.

1. Court of Appeal: The appeal was allowed unanimously. The court declared that the oral contract was not an agreement in writing for section 107 of the Housing Grants, Construction and Regeneration Act 1996 and that Part II did not apply.

2. High Court, Technology and Construction Court: His Honour Judge MacKay, sitting as a deputy High Court judge in the Liverpool District Registry, dismissed the application for a declaration on 9 May 2001 but granted permission to appeal. No citation is stated in the judgment.

3. Adjudication: The adjudicator decided that drawing schedules and a letter dated 31 January 2001 sufficiently evidenced the agreement and proposed to determine the referred dispute.