Adjudication Matters – October 2019

18th October 2019

Is a concrete supply contract a construction contract?

Universal Sealants (UK) Ltd (T/A USL Bridgecare) v Sanders Plant and Waste Management Ltd [2019] EWHC 2360 (TCC)

Introduction

In this case, the Technology and Construction Court (TCC) held that a concrete supply contract fell within the list of exclusions from “construction operations” under section 105(2)(d) of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996).

Accordingly, there was no statutory right to refer a dispute to adjudication, the adjudication provisions under Part I of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998/649) (Scheme for Construction Contracts 1998) did not apply, and the adjudicator lacked jurisdiction.

Key Legal Principles

There is no statutory right to refer a dispute to adjudication if the contract is not a “construction contract” as defined by the Construction Act 1996.

Section 104 Construction Act 1996: defines a “construction contract” as an agreement with a person for the carrying out of “construction operations” which form part of the land in England or Wales.

Section 105(1) Construction Act 1996: defines “construction operations” to include the construction, alteration, repair, maintenance and demolition of building and civil engineering works, of highway works, utility services, railways, industrial plant and mechanical and electrical systems (in each case forming or to form part of the land), site preparation, earthworks, tunnelling, scaffolding, landscaping and the painting or decorating of any building or structure.

Section 105(2) Construction Act 1996: provides a list of exclusions from the definition of “construction operations” under the Construction Act 1996, including the manufacture or delivery to site of materials except under a contract that also provides for their installation.

Part I of the Scheme for Construction Contracts 1998: where there is a “construction contract” under the Construction Act 1996, if the provisions of the contract do not comply with the requirements of the Construction Act 1996 then the adjudication provisions under Part I of the Scheme are implied into the contract.

Background

In October 2016, Universal Sealants (UK) Ltd (t/a USL Bridgecare) (USL) were engaged by A One+ Integrated Highways Services to carry out works on the A1 at the Bladon Haugh Viaduct site in Gateshead. Sanders Plant and Waste Management Ltd (Sanders) were engaged by USL in March 2017 to supply concrete at the site, in order to fill an expansion joint in a road.

USL had sent Sanders a subcontract order for the supply of grade designation M50 concrete at the site. Sanders brought the concrete to site by wagon and discharged it into the channel. The concrete supplied was of the type ST5, which was unfit for purpose and different to what was required by the subcontract order.

USL complained that the concrete was not of the correct type, and that it had to be dug out and replaced. USL sought to refer the dispute to adjudication arguing that the terms of the subcontract order applied. Sanders claimed that the subcontract order had not been agreed and the contract between the parties was formed on the basis of Sanders’ delivery note which USL had signed on delivery of the concrete to site.

The adjudicator found in USL’s favour that filling the expansion joint with concrete involved Sanders installing the concrete at the site, rather than just delivering it, and that this meant that the exceptions in section 105(2) Construction Act 1996 did not apply and the contract was a “construction contract”.

Sanders did not comply with the adjudicator’s decision and USL applied for summary judgment to enforce the adjudicator’s decision.

Decision

Jefford J sitting in the TCC, refused to enforce the adjudicator’s decision on the following basis:

• Formation of contract: the Judge considered that the contract was clearly made on the terms of the subcontract order (which incorporated USL’s terms and conditions), regardless of the discussions that took place around the time of delivery of the concrete to site.An offer to purchase the concrete was made, which was then accepted by Sanders’ conduct in delivering the concrete to site. Although Sanders had argued that the signing of the delivery note constituted the making of a counter offer, this was rejected on the basis that it was too late as it had been signed only after discharge of the concrete had been made by Sanders.
• Construction operations under the Construction Act and installation of concrete: the Judge held that the supply of concrete did fall within the list of exceptions in section 105(2) of the Construction Act 1996. There was no reference to installation within the subcontract order, nor was there any price or rate for installation given in the contract. The Court held that installation required something additional to delivery, in the context of the proviso to section 105(2) of the Construction Act 1996. With reference to the wet concrete material, it was noted that this material is unusual. Because concrete starts to set once it is mixed, it is almost always poured where it is required. Therefore, the act of delivery and pouring of the concrete both amounted to delivery of the material. Sanders had not done anything additional to the concrete, therefore there was no installation and therefore there was no statutory right to refer the dispute to adjudication.

Accordingly, the adjudicator did not have jurisdiction to determine the dispute.

Practical Implications

This case confirms the following conclusions:

• The delivery of materials to site will usually fall within the exception under section 105(2) of the Construction Act 1996 and will not be a “construction contract” unless there are clear express installation obligations.
• Installation implies a requirement for some sort of work to have taken place after delivery of the materials to site. Taking the example of the delivery of bricks to site to repair a bridge, the delivery of the bricks would not be a construction contract unless the supplier also did something additional to constitute installation, like laying the bricks.
• The Court noted that although it was not necessary for the relevant contract to refer to the word “installation”, the absence of this word is indicative of the nature of the parties’ conduct.