Oral construction contracts: RCS Contractors Ltd v Conway, a costly affair
Nikita Lalla, Ricardo Pillay & Zama Ngcobo
Certainty in a construction contract is all the more important when adjudication is envisaged to have to take place under a demanding timetable. The adjudicator has to start with some certainty as to what are the terms of the contract. This creates some difficulty when an adjudicator is faced with an oral construction contract. Referring a dispute under an oral construction contract leaves it squarely in the hands of an adjudicator or the court (persuaded by oral evidence) to determine this issue. This was a costly lesson learned in RCS Contractors Ltd v. Conway [2017] EWHC 715 (TCC).
Certainty in a construction contract is all the more important when adjudication is envisaged to have to take place under a demanding timetable. The adjudicator has to start with some certainty as to what are the terms of the contract. This creates some difficulty when an adjudicator is faced with an oral construction contract. Referring a dispute under an oral construction contract leaves it squarely in the hands of an adjudicator or the court (persuaded by oral evidence) to determine this issue. This was a costly lesson learned in RCS Contractors Ltd v. Conway [2017] EWHC 715 (TCC). The issue which the court was asked to decide was a simple one. Either there was one contract between the parties to cover all three sites, in which case the final account dispute was a single dispute, and the adjudicator had the necessary jurisdiction. Alternatively, there were three separate contracts, one in respect of each site, and the dispute was actually three different disputes, being a claim for the sum allegedly due under each separate contract. If that was the case the adjudicator did not have the necessary jurisdiction. RSC carried out groundworks for Conway as a subcontractor at three sites. RSC maintained that there was one oral contract for the work at these three sites. Conway maintained that there were three separate oral contracts and, in consequence, the adjudicator lacked the necessary jurisdiction to adjudicate on all three disputes. For the purposes of the dispute, RSC was seen as the subcontractor and Conway the contractor. On the balance of probabilities, the judge sided with RSC and found that there was one single contract between the parties concerning the three different sites. The judge reasoned as follows: - Mr O’Rourke for RSC was an honest and credible witness. He was clear that, in the relevant conversation, on 19 December 2012 he was told, and he agreed, that there was one contract covering all three sites. This was corroborated by the fact that later that day he arranged a payment to Conway. The documentary evidence showed that the money was paid into Conway’s account the following day. This was effectively a down payment on the commission which RSC had agreed to pay Conway if he secured them work.