English High Court orders construction company to pay over £220,000 for aggregate it claimed was unfit for purpose



England and Wales High Court
England and Wales High Court

An English judge has dismissed an appeal by a construction company that was ordered to pay over £220,000 to an aggregate supplier in exchange for supposedly defective aggregate it sold to them for the construction of a warehouse that liquefied in heavy rainfall.

It was argued by Readie Construction Ltd that the purchase price never fell due as the goods supplied by the respondent, Geo Quarries Ltd, were not of the type promised. Alternatively, it pled that it was entitled to rely on abatement and that the contract did not fall within the true construction of section 49 of the Sale of Goods Act 1979.

The appeal was heard in the High Court (Queen’s Bench Division) by Justice Martin Spencer. Mr Seb Oram appeared for the appellant and Mr David Lascelles for the respondent.

Turned to slurry

In 2018, the parties agreed a contract for the supply of a quantity of “GSB Type 1” aggregate to the appellant at a price of £19.50 per tonne. The appellant sent a purchase order for 31,000 tonnes, to be delivered by the respondent in batches to a construction site in Bedfordshire. The material was to be used to lay a sub-base between the ground-bearing slab of a new warehouse and associated hard-standings the appellant was constructing.

Having delivered £543,000 worth of aggregate in the period up to 10 September 2018, which was paid for in full, the respondent delivered a further 9,576 tonnes of aggregate and invoiced the appellant for £224,091.52. However, over the weekend of 13 October 2018, there was heavy rainfall at the site which caused the aggregate to liquefy and turn into slurry. The appellant then suspended all future payments to the respondent.

It was the appellant’s position that the respondent had not supplied them with GSB Type 1 aggregate, as that would not have liquefied under heavy rainfall, and thus they were not required to make further payments. The respondent argued that under clause 4.1 of the purchase contract, the appellant was obliged to make payment in full without any deduction or withholding by the end of the calendar month following the month in which the relevant invoice was dated.

It was held by the county court judge who initially heard the case that clause 4.1 excluded the remedy of abatement even where the goods supplied were different to those contracted for, as it prevented any deductions from the purchase price. He further considered that the case fell within section 49(2) of the 1979 Act as the purchase price was payable on a certain date irrespective of delivery.

Counsel for the appellant submitted that, on its true construction, clause 4.1 was concerned with how payment was to be made but not with what had to be paid. Further, the judge had erred in failing to consider exactly which kinds of deductions were not permitted under the contract.

Payment and delivery divorced

In his judgment, Justice Spencer said of the construction of the contract: “Where Geo delivers goods which are bone fide purported delivery under the contract (thus excluding situations of fraud), then in my judgment there has been delivery under the contract for the purposes of the terms and conditions and Readie cannot withhold payment on the basis that the goods do not come up to specification, or on the basis that there has been short delivery and the doctrine of abatement is excluded.”

He continued: “It seems to me that what the parties have sought to do, by agreeing these terms and conditions, was to [create an] obligation to pay on presentation of the documents. Once there has been bona fide, purported delivery, then the obligation to pay arises, that being an obligation to pay the price as set out in the quotation and confirmed in the Order.”

Turning to whether section 49(2) of the 1979 Act applied, the judge said: “It seems to me that section 49(2) must be read both as a whole and in conjunction with section 28. Section 28 provides that payment and delivery are concurrent conditions so that, unless otherwise agreed, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer must be ready and willing to pay the price in exchange for possession of the goods.”

He continued: “lf one reads the words ‘the price is payable on a day certain irrespective of delivery’ together, then it can be seen that what is envisaged is a contract whereby delivery and payment on a day certain are divorced from each other, although the contract may still provide for delivery at some other time and, indeed, delivery (or purported delivery) may be a pre-condition for payment of the price, as here.”

Justice Spencer concluded: “Readie’s interpretation of section 49(2) seems to me to lead to a surprising result, namely that there are no circumstances in which Geo could maintain a claim for the price as opposed to damages.”

The appeal was therefore dismissed.

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