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Adjudication
Cleveland Bridge (UK) Ltd v Whessoe-Volker Stevin Joint Venture [2010] EWHC 1076 (TCC)

Daniel Atkinson 08 June 2010


KEYWORDS: Cleveland Bridge (UK) Ltd v Whessoe-Volker Stevin Joint Venture [2010] EWHC 1076 (TCC), ABB Zantingh Limited v Zedal Building Services Limited [2001] BLR 66, Attorney General of Belize v Belize Telecom Limited [2009] UKPC 10, Cantillon Limited v Urvasco Limited [2008] BLR 250, Farebrother Building Services Limited v Frogmore Investments Limited [2001] CILL 1589, Fence Gate Limited v James R Knowles Limited (2002) 84 Con LR 206, Gibson Lea Interiors Limited v Macro Self Service Limited [2001] BLR 407, Griffin v Midas Homes Ltd (2001) 78 Con LR 152, Homer Burgess Limited v Chirex (Annan) Limited [2000] BLR 124, Homer Burgess Limited v Chirex (Annan) Limited (No 2), Investors' Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, KNS Industrial Services (Birmingham) Limited v Sindall Limited (2001) 75 Con LR 71, North Midlands v AE &E Lentjes [2009] BLR 574, Palmers Limited v ABB Power Construction Limited [1999] BLR 426, Pepper v Hart [1993] AC 593, RSL (South West) Limited v Stansell Limited [2003] EWHC 1390 (TCC), Shimizu Europe Limited v Automajor Limited [2002] BLR 113, Housing Grants Construction and Regeneration Act 1996, Section 104(5), Section 105(1), Section 105(2)(c), adjudication, enforcement, statutory interpretation, subcontract, objection to jurisdiction, partial jurisdiction, construction operation, part construction operation, construction contract, erection, steelwork, installation, severance, severability, one dispute, Mr Justice Ramsey.

In Cleveland Bridge (UK) Ltd v Whessoe-Volker Stevin Joint Venture [2010] EWHC 1076 (TCC) the adjudicator's decision related to a subcontract for works at the liquified natural gas terminal at Milford Haven. Cleveland Bridge applied for enforcement of the adjudicator's decision. The Joint Venture resisted the application on two alternative grounds.

  1. The agreement between Cleveland Bridge and the Joint Venture was not a construction contract because certain operations fell within the exception in s.105(2)(c) of the Housing Grants, Construction and Regeneration Act 1996.
  2. To the extent that the works under the subcontract fell partly within construction operations under section 105(1) and partly under the exceptions in section 105(2) the adjudicator did not have jurisdiction in relation to the elements of the work that did not come within the definition of construction operations and the Decision should not be enforced.

Ramsey J. identified the three logical steps in determining whether the Adjudicator had jurisdiction to determine the claim referred where there was an issue whether the work came within the definition of construction operations.

  1. It had to be determined whether under section 105(1) the relevant work carried out by Cleveland Bridge came within the definition of construction operations.
  2. The next question was whether any part of the work and, if so, what part came within the provisions of section 105(2) which were not construction operations within the meaning of the Act.
  3. To the extent that there were construction operations and works which were not construction operations, the question then arose as to the effect of this on the jurisdiction of the Adjudicator and on the enforceability of her Decision. In that respect section 104(5) was relevant which provides:
    "Where an agreement relates to construction operations, and other matters, this Part applies to it only so far as it relates to construction operations."

Construction Operations under Section 105(1).

Cleveland Bridge submitted that all the works were to be classified as construction operations under Section 105(1) of the 1996 Act. It submitted that it was only the erection works for the steel work in the form of piperacks and pipebridges which might potentially come within Section 105(2). It was submitted that the erection work for the steel work to the piperacks and pipebridges amounted to only 18.2% of the final account value. In such circumstances it was submitted, the element of work which might come within section 105(2) was so small that as a matter of fact and degree that work would not be excluded by section 105(2) and the whole of the work to be carried out under the Subcontract would be treated as construction operations within section 105(1) of the Act. The Joint Venture submitted that significant and substantial work in relation to the piperacks and pipebridges formed part of the Services under the Subcontract and that this work came within the exception in section 105(2)(c)(ii).

Ramsey J. referred to North Midlands v AE &E Lentjes [2009] BLR 574 and ABB Zantingh Limited v Zedal Building Services Limited [2001] BLR 66 and identified the following principles:

  1. The relevant works are to be looked at broadly to see whether or not they come within the exception in section 105(2).
  2. The question must be a matter of fact and degree where inevitably there will be grey areas.
  3. It was not the intention of the 1996 Act for there to be a minute analysis to find an item which arguably was a construction operation or was within the exclusion, so as to defeat the purpose of giving or excluding the rights of the Act to what on a straightforward and commonsense analysis is a contract for construction operations within section 105(1) or excluded operations under section 105(2).

Ramsey J. applied the above principles to the facts of the instant case. He held that in relation to the piperacks and pipebridges, when looked at on a straightforward and commonsense analysis, the relevant operations relating to that steelwork come within the excluded operations under section 105(2). He held that not all the works in the instant case could be classified as construction operations under section 105(1). Instead there were clearly significant and substantial works within section 105(2). He then turned to the second question and considered the precise scope of the work to the piperacks and pipebridges which was excluded under the provisions of section 105(2)(c)(ii).

Operations excluded under Section 105(2).

It was common ground that the work carried out under the Subcontract was carried out on a site where the primary activity was the production, transmission, processing or bulk storage of gas. The issue between the parties was whether the element of the work within the excluded operations was all the work to the "steelwork for the purposes of supporting or providing access to plant or machinery" or whether it is limited to the "erection" element of that steelwork.

Ramsey J. held that the approach to the construction of this legislation was on the basis of the objective meaning being the "meaning which the instrument would convey to a reasonable person having all the background knowledge that would reasonably be available to the audience to whom the instrument is addressed" as stated by Lord Hoffmann in Attorney General of Belize v Belize Telecom Limited [2009] UKPC 10, referring to Investors' Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896.

Ramsey J. made observations which suggested that the word "erection" in section 105(2)(c) should be given a narrow meaning.

  1. The operations described in section 105(2) could generally be brought within the description of operations in section 105(1) so that the intention was to exclude a specific operation from the more general description of operations.
  2. The provisions of sections 105(2)(a) to (c) were aimed at excluding certain particular operations either generally or in specific industries. For those industries, instead of saying that all operations which would otherwise be construction operations were excluded, the reference is to particular operations on sites where the primary activity is one of the industries. The exclusion is therefore limited to those particular operations.
  3. The definition in section 105(2) had not been broadened by the use of such words as "operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations....", as has been done in section 105(1)(e).
  4. For the reasons set out in North Midland v Lentjes, the phrase "assembly, installation