In the context of construction, “supply only contracts” are contracts for the supply of materials, plant or equipment with no labour element. If you are not in the industry, you may be surprised to hear supply only contracts contribute an estimated £66bn to the U.K. economy annually.

Supply only contracts are excluded from the scope of the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “HGCRA”), meaning that they are not afforded a statutory right to refer any disputes to adjudication.

In Cubex (UK) Ltd v Balfour Beatty Group Ltd [2021] EWHC 3445 (TCC), the court considered whether a contract for the design and supply of doors was a supply only contract.

The decision in Cubex prompts another discussion on whether supply only contracts should be caught by the HGCRA, a topic that we have written about previously: Concrete provisions - should the HGCRA be extended to 'supply only' contracts?

Case Summary: Cubex Ltd v Balfour Beatty Group

In February 2017, Balfour Beatty Group Ltd (“BB”) engaged Cubex (UK) Ltd (“Cubex”) to design and supply doors for a project to fit out Woolwich Station (the “Contract”). However, the parties were not agreed as to the exact date that the Contract was formed and the Contract sum.

In May 2018, Cubex obtained an adjudicator’s decision for around £408,000 (the “Decision Sum”).

In September 2021, Cubex issued enforcement proceedings for the Decision Sum plus interest. BB resisted enforcement on four grounds, the primary ground being that the Contract was a supply only contract and that the adjudicator had no jurisdiction to decide the dispute (“Ground 1”).

Ground 1

The judge began by stating that, despite the parties’ positions on the formation date of the Contract and the Contract sum, it was agreed by the parties that Cubex was required to design and supply doors.

The judge set out section 105(2)(d) of the HGCRA, which says that the “manufacture or delivery to site of building […] components [or] materials” are not 

“construction operations” and therefore not within the scope of the HGCRA.

The judge then referred to section 104(2) of the HGCRA, which says that an agreement to carry out design work is within the scope of the HGCRA, so long as it is “in relation to construction operations”.

Applying the provisions above to the Contract:

• the supply element of the Contract was not caught by the HGCRA; and
• as the design element of the Contract was related to excluded operations, the design element was also not caught by the HGCRA.

The judge, therefore, decided that the adjudicator had no jurisdiction to decide the dispute, and refused to grant summary judgment to Cubex.

Legal Analysis: Cubex Ltd v Balfour Beatty Group

While the decision in Cubex is predictable, it prompts another discussion as to whether supply only contracts should be caught by the HGCRA and, if so, how that could be effected. Material suppliers and plant-hire companies would undoubtedly benefit from the statutory right to refer disputes to adjudication. However, the HGCRA’s regular payment mechanism may need adjusting to suit supply only contracts.

Alternatively, parties to supply only contracts can provide for adjudication within their standard terms. One example of this is the Construction Plant-hire Association’s Model Conditions, which import the adjudication provision of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended) in full, with minor amendments.