Adjudication
Staveley Industries plc v Odebrecht Oil & Gas Services Ltd (28 February 2001) TCC

© Daniel Atkinson 2001 22 September 2001

The issue in Staveley Industries plc v Odebrecht Oil & Gas Services Ltd (28 February 2001) TCC was whether four sub-contracts between Staveley and Odebrecht were construction contracts as defined by the Housing Grants Construction and Regeneration Act 1996 and whether they were subject to the provisions of that Act.

Staveley was the subcontractor for the design, engineering, procurement, supply, delivery to site, installation, testing and commissioning of instrumentation, fire and gas, electrical and telecommunications equipment. There was no distinction, material for the matter to be decided, between the subcontracts. The equipment was for installation in steel modules, constructed in a yard adjacent to the River Tees intended as living quarters for operatives at an oil or gas rig in the Bay of Campeche in the Gulf of Mexico. The modules were three storeys high, 70 feet wide, 63 feet high and 145 feet long. They were to be placed on barges and towed out to the Gulf of Mexico where they would be welded on to platforms supported by legs founded in the bed of the sea. The platforms were several tens of metres above the sea bed.

His Honour Judge Richard Havery QC rejected Staveley’s submission that the modules formed part of the land when standing in the yard at Teesside. While construction was taking place the modules were placed on stands approximately two metres above ground level. The stands were either steel frames or concrete blocks. The modules were movable and intended to be moved, although moving them involved a considerable engineering operation. The modules were not intended to be used at that location. Moving the modules was not expected to damage the modules or the land.

Staveley submitted that the subcontract work fell within both Sections 105(1)(a) and (c) of the Act. There was no dispute that the inclusion of an operation within one of those Sections did not preclude it from inclusion in the other, correctly in the view of Judge Havery. Staveley relied on the decision of Dyson, J. in Nottingham Community Housing Association Limited v. Powerminster Limited [2000] BLR. 759. That was a case of repair and maintenance, but Dyson J. said that in the construction of a building for instance Section 105(1)(a) applied as much to the installation of a demountable wall partition as it did to the installation of a central heating, air-conditioning, sanitation system or any of the other fittings mentioned in Section 105(1)(c).

Odebrecht submitted that the subcontract work did not fall within either Section 105(1)(a) nor (b). The installation of fittings, as opposed to their alteration, repair etc., did not fall within Section 105(1)(a) since it was not construction or any of the other things mentioned in that Section.

Judge Havery held that not all activities falling within Section 105(1)(c) necessarily constituted construction so as to fall within Section 105(1)(a). Section 105(1)(c) was certainly the only section which dealt specifically with installation of equipment. It was common ground that the installation work was of a kind described in Section 105(1)(c).

Odebrecht submitted that for the work to fall within Section 105(1)(c) the fittings had to form part of the land; it was not sufficient that they could subsequently form part of the land. It was notable that only the present tense "forming part of the land" was used in Section 105(1)(c), whereas in Sections 105(1)(a) and (b) the corresponding expression is "forming, or to form, part of the land".

Staveley submitted that the distinction was irrelevant. The words "forming part of the land" were simply descriptive of the kind of fittings intended to be included in the Section and invited Judge Haveryto look at the relevant debates in Parliament concerning the bill that was enacted as the Act.

After examining the debate in Hansard Judge Havery held that the debate threw no light on the question whether the expression "forming part of the land" in Section 105(1)(c) should be interpreted as including prospective as well as present attachment to the land. He held that the expression "forming part of the land" was not purely descriptive of the fittings. The language of Section 105(1)c) required the fittings to form part of the land at least prospectively, if not immediately upon their installation.

The issue therefore was whether or not the modules were to form part of the land. Staveley submitted that they were. The rigs were founded in the sea bed; and the Interpretation Act 1978 defined land as including land covered by water.

Odebrecht submitted (1) that "the land" was not any land, but was the land on which the relevant construction operation was carried out; (2) that the Act applied only to land within England, Wales or Scotland; and (3) that the rigs were not "land".

On the point (1) Odebrecht submitted that in the context and given the use of the definite article, the land must mean the land where the operation was carried out. The construction of, or the installation of fittings in, buildings or structures forming (in the present tense) part of land can take place only on the land where the building or structure is situated when built. Judge Havery accepted this point and held that the use of the definite article did suggest that the expression "the land" referred to that land.

As to point (2), the operations did not fall within the Act unless they are carried out in England, Wales or Scotland, by virtue of the provision of Section 104(6)(b) of the Act. Thus the completed buildings or structures must be in England, Wales or Scotland. That suggests that the same applies to structures that are to form part of the land. Staveley submitted that section 105(l)(a) and (c) extended to cases where, installation did not take place on the same land as that of which the structure, was to form part. Staveley relied on a passage in the judgment of His Honour Judge Thornton Q.C. in Palmers Limited v. ABB Power Construction Limited [1999] BLR. 426,432 in which he stated that the nature, size and method of fixing into position of the steel structure and the boiler itself clearly had the consequence that the boiler formed part of the land once assembled and fixed into position. He stated further that the fact that much of the boiler was assembled on site but away from its permanent resting place and then lifted into position did not affect the conclusion that a construction activity is involved. He concluded that since much industrial plant would be assembled and erected in this way and since such plant was expressly included in the definition of a construction operation, the only reasonable conclusion was that ABB's work was a construction operation. Judge Havery held that passage relied on by Staveley had no bearing on the point. In that case ABB's contractual work was the assembly and erection of the boiler. Judge Thornton was dealing with the argument that the work did not constitute a construction operation.

On point (3), Odebrecht relied on the case of Argyll & Bute D. C. v. Secretary of State for Scotland [1976] S.C. 248, a decision of the Second Division of the Court of Session. That case involved the construction of the Town and Country Planning (Scotland) Act 1972. "Land" was defined in section 275 of that Act, and the relevant part of the definition was that "land" included land covered with water. The relevant part of the definition contained in the Interpretation Act 1978 was the same, and applied to the Act unless the contrary intention appears. Counsel in Argyll argued that the sea bed was not land. Lord Wheatley, with whom Lord Leechman and Lord Thomson concurred, accepted the argument of counsel, observing that the basic distinction between land and sea still existed, and the inclusion of land covered with water in the definition of "land" was to include the seashore which, according to the tides, might or might not be covered by water. That area was confined to tidal land.

Judge Havery held that none of the foregoing arguments were conclusive. They had to be considered in the light of such intention of Parliament as may be deduced from the provisions of the Act and the mischiefs against which it was directed. It was perfectly clear that the Act did not extend to shipbuilding. If the platforms were to be floating platforms, the Act would certainly not apply. The distinction between a floating platform and a platform founded in the sea bed appeared to be irrelevant to any intention of Parliament, and any differential application of the Act arising out of it would appear to be accidental. Moreover, it was common ground that the provisions of section 105 (1) were derived from section 567(2) of the Income and Corporation Taxes Act 1988. The provision corresponding to section 105(l)(a) of the. Act was section 567(2)(a). Where section 567(2)(a) has "structures (whether permanent or not), including offshore installations" section 105(l)(a) has "structures forming, or to form, part of the land (whether permanent or not)". That suggested an intention to exclude offshore installations from the ambit of the Act, or at least the absence of any intention to include them.

In the light of those considerations, Judge Havery held that structures which are, or are to be, founded in the sea bed below low water mark are not structures forming, or to form, part of the land. Accordingly he declared that the Act did not apply to the subcontracts in question.