Adjudication
Gibson Lea Retail Interiors Ltd -v- Makro Self Service Wholesalers Ltd (2001) TCC

© Daniel Atkinson 2002 20 January 2002

The decision in Gibson Lea Retail Interiors Ltd -v- Makro Self Service Wholesalers Ltd (2001) TCC is important to shopfitting industry which may involve windows, doors and stairs but may also involve carpets and moveable units. The decision examines the meaning of the term "forming part of the land" in the definition of "construction operation" under Section 105 of the Housing Grants and Construction Act 1996.

Makro employed Gibson Lea to undertake the supply and installation of shop fittings in four stores. The work in connection with each store was the subject of a separate contract. The items to be provided in the stores were of the same kind although precise numbers and items differed between each of the stores.

Gibson Lea alleged that it carried out the work for Makro at the stores and rendered various invoices to Makro, but Makro had not paid those invoices. Gibson Lea served a notice of adjudication. Makro replied that Gibson Lea was not able to avail itself of the provisions of the Act because the works were not construction operations. Accordingly Gibson Lea sought summary judgment for its declaration that the works were construction operations for the purposes of Part II of the Housing Grants, Construction and Regeneration Act 1996 and that as a consequence it was entitled to refer disputes arising under any one or more of these contracts to adjudication in accordance with the Scheme for Construction Contracts (England and Wales) Regulations 1998.

His Honour Judge Richard Seymour QC held as a preliminary point that shopfitting did not amount to "construction operations" unless it was "construction…of…structures forming, or to form, part of the land (whether permanent or not)" under Section 105(1)(a) or "installation in any building or structure of fittings forming part of the land" under Section 105(1)(c).

What might be involved in a structure or fittings "forming part of the land" was not addressed in the Act. Judge Seymour referred to the law of real property in which the concept of a fixture was well-established, and held that the definition of "construction operations" in section 105(1) of the Act above was directed to whether the particular structure or fittings would, when completed, amount to a fixture or fixtures. In the law of real property one of the factors which was relevant to a determination of whether a chattel attached to a building is a fixture or not is whether the attachment is intended to be permanent Billing v. Pill [1954] 1 QB 70.

Judge Seymour observed that some, at least, of the items for supply were plainly chattels which were not intended to be fixed to anything, such as stools and mirrors, as well as mobile bread and cake stands. Other items included various display gondolas which were fixed by screws to timber fixing plates that were themselves either wall bolted or screw fixed to the structure/interior walls of the buildings. Some were fixed to the floor and some were surrounded by corner protection plates fixed to the floor.

Makro referred and relied upon the law of real property and argued that in fact none of the items supplied by Gibson Lea formed, or was intended to form, "part of the land". In the decisions of the Court of Appeal in Lyon v. London City and Midland Bank [1903] 2 KB 135 and Horwich v. Symond (1915) 84 LJKB 1083 in the law of real property it was not enough to constitute a fixture to be secured to the structure of a building. It was decided in those cases that the mere fact of some annexation to the freehold is not enough to convert a chattel into realty. That was the case for carpets, which were certainly not fixtures; and the same principle applied to a shop counter which stood on the floor not as a fixture, but as a chattel with a certain amount of fixing to keep it steady.

Makro submitted that the test of whether a chattel had become a fixture or not was in part the degree of annexation, but principally the purpose of any annexation which had taken place. If the purpose of any annexation was the better use or enjoyment of the chattel as a chattel it was not normally to be considered as a fixture. In the instant case Makro submitted that any fixing of gondolas to walls or floors was simply to keep units which could have been free-standing more stable.

Gibson did not dispute the submissions on the law of real property, but argued that a purposive approach should be taken. A purposive approach involved, in effect, so construing the definition of "construction operations" as to include everything which arguably fell within it which was not specifically excluded by section 105(2) of the Act. It was submitted that it was appropriate to have regard to the terms of section 105(2) as indicating that which would fall within the definition of "construction operations" but for its express exclusion by that sub-section. The intention was that any contract which included "installation" (unless, possibly de minimis) was brought back into S105(1) by the proviso to S105(2)(d). Reference was made to the statement of Lord Lucas during the passage of the Bill as recorded in Hansard.

Judge Seymour held that the proper construction of section 105(1)(a) of the Act of the words "construction…of… structures forming ,or to form, part of the land (whether permanent or not)" was clear and not ambiguous. It was the structures which need not be permanent. The effect of referring to "forming, or to form, part of the land" was to import into section 105(1)(a) of the Act the concepts and tests of the law relating to fixtures.

Judge Seymour held that the effect of the decision of the House of Lords in Pepper v. Hart [1993] AC 593 was that regard could only be had to Parliamentary material, as an aid to the construction of legislation which was ambiguous or obscure or the literal meaning of which led to an absurdity. In the circumstances it was not necessary or appropriate to consider what Lord Lucas said in the House of Lords in moving the amendment to include the relevant words in the Act while it was still a Bill. It was held in any event that the reference did not assist since it was unclear whether it was the intention of Parliament to incorporate the law relating to fixtures or the law relating to fixtures as explained by Lord Lucas.

It was held in the instant case that none of the items supplied by Gibson Lea to Makro were, as and insofar as installed, fixtures. It followed that the works done by Gibson Lea for Makro were not "construction operations" and that the relevant contracts were not "construction contracts". On that basis not only did the application for summary judgment fail, but the action as a whole could not succeed.

Another question which arose was whether, in the light of the provisions of section 104(5) of the Act, and assuming that some part, at least, of the works for which each of the contracts between Gibson Lea and Makro provided could properly be characterised as "construction operations", Gibson Lea was entitled to refer to adjudication all of its claims under the relevant contract. It was held that since the contract included works which were undoubtedly not "construction operations", the effect of section 104(5) of the Act was that the application for summary judgment and the action failed for that reason. This part of the judgment seems to have been based on the wide terms of the declaration sought.

The application for summary judgment was dismissed and judgment given for Makro in the action.