Hybrid Construction Contracts

• Published date: 19 October 2020
• Subject Matter: Real Estate and Construction, Construction & Planning
• Law Firm: Hill Dickinson
• Author: Mr Alan Pugh and Jemma Ellison

Hybrid construction contracts are those that include both construction operations covered by the Housing Grants, Construction and Regeneration Act 1996 (the Act) and non-construction operations. Is it, therefore, obligatory that hybrid contracts include distinct notifications with separate breakdowns for each type of operation?

This is an important question and one that was considered in the case of C Spencer Limited -v- M W High Tech Projects UK Limited [2020] EWCA Civ 331. In this case, the uncertainty stemmed from the fact that 'construction operations' are covered under the Act while 'non-construction operations' are not. It was a question of whether the wording of section 104(5) of the Act, 'only so far as it relates to construction operations', should be written into the provisions of a contract relating to payment.

The case between CSL and MW involved a hybrid subcontract for the provision of construction operations in the form of engineering works and non-construction works such as the erection of steelwork for plant and machinery. Upon a dispute arising as to an interim payment, it was proposed that the dispute be settled by way of an adjudication. MW challenged this method and argued that the adjudicator could only decide on issues in respect of construction operations, rather than non-construction operations.

The adjudication claim was withdrawn and instead MW issued an application for interim payment that distinguished the construction operations from non-construction operations, but MW's responding payment notice did not make this distinction.

CSL issued proceedings in the Technology and Construction Court (TCC) in 2019 for payment of '2.6 million. The TCC held that MW's payment notice was valid as the payment provisions in the subcontract reflected the Act and therefore construction operations and non-construction operations did not need to be distinguished in the payment notice.

The case was subsequently appealed.

Upholding the decision, the Court of Appeal found that there was only a need for a distinct...