ROK Building Ltd v Bestwood Carpentry Ltd [2010] EWHC 1409 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

summary

1) Where a written contract provides for a mechanism for arriving at a price then it is not necessary, for there to be a construction contract in writing for the purposes of s.107 of the Housing Grants, Construction and Regeneration Act 1996 (the “Act”), that the actual price is expressly recorded in writing.  (2) Where there is no agreement as to price whether oral or otherwise but all the other terms of the contract are in writing, there can still be a construction contract in writing within s.107 of the Act, as the Court will determine the price having regard to an implied term as to reasonable rates or prices.  (3) However, where a written contract refers to “agreed prices” and these prices have been agreed orally, there will not be a construction contract in writing for the purposes of s.107. 

Technology and Construction Court, Mr Justice Akenhead

background

The claimant (“Rok”) was engaged as main contractor to construct residential units at a development in north London.  Rok retained a subcontractor to carry out various joinery works, but experienced problems with that subcontractor and entered negotiations with the defendant joiners (“Bestwood”).  On 6 February 2006 a meeting was accordingly held between Rok and Bestwood and the parties entered into further written and oral communications.  A fortnight after the meeting Rok sent Bestwood a pro forma “instruction to subcontractor”.  Rok issued a number of other instructions on the same form to Bestwood between February and late March 2006.  By late March 2006 Rok had issued over 20 instructions with specific works to be carried out.  At the end of March 2006 Bestwood, at Rok’s request, supplied Rok with rates and prices to carry out work on a measured work basis.  On 24 March 2006 Rok sent Bestwood a further pro forma marked “letter of intent”.  Bestwood carried out the work in the instructions and the letter of intent.  The parties subsequently fell into dispute regarding the value of dayworks and measured works undertaken by Bestwood.  Bestwood referred the issue to adjudication.  The Notice of Adjudication stated that it was being served pursuant to Rok’s sub-contract conditions as amended.  Upon the appointment of an adjudicator, Rok reserved its rights regarding jurisdiction, arguing that the contract between the parties was not in writing for the purposes of s.107 of the Act.  The parties (with the agreement of the adjudicator) agreed to ask the Court to rule on the jurisdictional issues between them. Rok therefore initiated proceedings seeking declarations that the adjudicator did not have jurisdiction to proceed.

issues

The Court was asked to consider whether or not the writing requirements of s.107 of the Act had been satisfied.

decision

The Court held:

  • All the terms of a construction contract must be evidenced in writing to satisfy the requirements of s.107 of the Act:  RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd.
  • However, where the written contract provides for a mechanism for arriving at a price then it is not necessary, for there to be a construction contract in writing for the purposes of s.107 of the Act, that the actual price is expressly recorded in writing.  The situation is different where there is an oral agreement about price which is not subsequently reduced to writing or evidenced by writing – this will not satisfy the requirements of s.107 of the Act.
  • A construction contract in writing in which there is no agreement as to price (oral, in writing or otherwise) will still be a construction contract within the Act, as the Court will determine the price having regard to an implied term as to reasonable rates or prices.
  • On the facts of this case, whilst there was undoubtedly a contract between the parties, there were terms which were orally agreed which were not contained in or evidenced by writing.  In particular, although the correspondence referred to “agreed rates”, these rates were only agreed orally.  The contract did not, therefore, satisfy the requirements of s.107 of the Act.  Accordingly a declaration would be granted that the adjudicator lacked jurisdiction to proceed.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

 

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