The claimant contracted with the defendant to carry out the construction of a gas pipeline running from Samlesbury to Helmshore in Lancashire. The contract was the NEC Engineering and Construction Contract (second edition) Option A; also, the Priced Contract with Activity Schedule, with certain secondary options and an Appendix 1 dated 21 August 2001.

This case was primarily an application for summary judgment to enforce an adjudicator’s decision.

The defendant refused to pay the amount set out in the adjudicator’s decision, sought a stay of execution of the summary judgment application RSC Order 47, Rule 1(1) and argued that their counterclaim/preliminary issues should be dealt with during current proceedings.

Was a supplemental agreement a separate “construction contract” or, was it just a variation to the main contract?

Reference

Mr Justice Jackson held that the supplemental agreement was a variation to the main contract because:

  • The supplemental agreement varied the main contract sum
  • It identified which matters it covered by the increase to the contract sum
  • Recital C in the supplemental agreement stated that the main contract remained in force, “save to the extent to which the terms of [the] supplemental agreement modify, alter or vary the terms contained in the contract”
  • The contract and the supplemental Agreement were mutually entwined
  • The case of L. Brown & Sons v Crosby (TCC 5 December 2006) supported the approach.
The supplemental agreement was a variation to the contract, and so there was one construction contract in writing for the purposes of the HGCRA. The claimant was, therefore, entitled to summary judgment on the adjudicator’s decision, and the stay of execution application was refused. The defendant’s counterclaim was stayed pursuant to s9 of the Arbitration Act 1996.

*Full case details:
McConnell Dowell Constructors (Aust) PTY Ltd v Natoinal Grid Gas plc (formerly Transco plc) [2006] EWHC 2551 (TCC), Jackson J

Contact Fenwick Elliott on 020 7421 1986 or NGould@fenwickelliott.co.uk

Postscript

This case is interesting because the court had to consider whether a supplemental agreement between the parties was a new separate stand alone contract, or just a variation to the original main contract. If the supplemental agreement had been a separate contract, then the adjudication decision might not have been enforced because the supplemental agreement did not contain an adjudication agreement, and it was not a “construction contract” and so adjudication would not have been implied into the supplemental agreement.

More importantly, the guideline set out by the judge is helpful when considering whether separate agreements are really free standing contracts, or just variations to a building contract.