Digital Mobile Spectrum Limited ("DMSL") was set up as a joint venture by four UK mobile network operators to tackle the detrimental effect of 4G mobile broadband on digital terrestrial television. DMSL appointed various contractors to provide remedial intervention services to households whose television reception had been affected. Crystal Electronics Limited ("Crystal") was one such contractor and between 2013 and 2023, Crystal undertook works which primarily comprised attending properties and:
- Identifying all television equipment in use (including undertaking a basic visual survey of the exterior of the property to identify aerials / their location and the presence of anything in the vicinity which might affect signal reception);
- Checking which channels were being received;
- Taking signal readings at the location of receiving devices;
- Where there was adequate signal, fitting set-back filters and/or retuning television sets;
- Where signal was inadequate, taking signal readings in loft and/or on the roof and/or installing internal amplifiers and/or realigning aerials and/or moving aerials and/or removing and replacing aerials and/or installing a filter to an aerial and/or fitting a mast head amplifier adjacent to an aerial.
Following DMSL giving notice to terminate its agreement with Crystal in early 2023, Crystal raised two invoices totalling approximately £800,000. When DMSL disputed its liability to pay them, Crystal referred the dispute to adjudication (two adjudications in fact, one in respect of each unpaid invoice). In the first adjudication, DMSL challenged the adjudicator's jurisdiction on the basis that the agreement between the parties was not a "construction contract" under the Housing Grants, Construction and Regeneration Act 1996, as amended ("the Construction Act"). The adjudicator formed a preliminary view that he did have jurisdiction and ultimately found in favour of Crystal in both adjudications, awarding payment of the invoices plus interest.
When DMSL failed to make payment in accordance with the adjudicator's decision in the first adjudication, Crystal commenced enforcement proceedings by way of an application for summary judgment. This was dismissed and a trial to determine the enforceability of both adjudications followed. The trial centred around the extent to which works undertaken by Crystal, to which the adjudication decisions related, comprised "construction operations" under section 105(1) of the Construction Act. For the decisions to be enforceable, only a de minimis part of the works could relate to works which were not construction operations[1] (unless the part of the decision relating to works which were not construction operations could be severed[2]).
Crystal maintained that both adjudication decisions were enforceable in their entirety because all works undertaken by them (as summarised above) either comprised:
- construction operations falling within section 105(1)(b), (c) or (e) of the Construction Act[3]; or
- surveying work / the provision of engineering advice in relation to construction operations as provided for at section 104(2) of the Construction Act[4].
Decision
Whilst HHJ Keyser QC acknowledged that the works undertaken by Crystal were brought within the potential scope of construction operations, he found that they ultimately were not because as a matter of fact, a substantial proportion of the works were not undertaken on structures "forming part of the land", as required by sections 105(1)(b) and (c) (and therefore section 105(1)(e)) of the Construction Act. In relation to the purported surveying work / engineering advice provided by Crystal, the judge found that not only did the relevant tasks undertaken by Crystal (namely the basic visual survey and reporting of signal readings to DMSL) not comprise surveying work / engineering advice as contemplated by the Construction Act, but that even if they did, Crystal's proposition would still fail because the surveying / advice provided was not in relation to construction operations. Accordingly, HHJ Keyser QC held that neither adjudication decision was enforceable.
Takeaways
This case provides a useful refresher of the application of the Construction Act in relation to hybrid contracts and guidance on what constitutes "construction operations". On a practical level, it serves as a reminder of the importance of considering jurisdictional challenges when presented with an adjudication, as well as giving some thought to the kind of works being undertaken at the outset of contract negotiations if a right to adjudicate is important to you. Where works comprise a mixture of construction operations and matters which are not contain construction operations, express adjudication provisions will ensure a right to adjudicate in respect of all works in the event of a dispute.
[1] C Spencer Ltd v M W High Tech Projects UK Limited [2020] EWCA Civ 331
[2] Cleveland Bridge (UK) Ltd v Whessoe-Volker Stevin Joint Venture [2010] 1076 (TCC)
[3] See section 105(1)(b), (c) and (e): https://www.legislation.gov.uk/ukpga/1996/53/section/105.
[4] See section 104(2): https://www.legislation.gov.uk/ukpga/1996/53/section/104
