In North Midland Construction Plc v A E & E Lentjes UK Ltd [2009] EWHC 1371 (TCC) Mr Justice Ramsey considered the meaning of "construction operations" under the Housing Grants Construction and Regeneration Act 1996 and particularly the scope of the exception in Section 105(2)(c).
Ramsey J considered the narrow interpretation of the exception in Palmers Ltd v ABB Power Construction Ltd [1999] BLR426 and the broader construction in ABB Power Construction Limited v Norwest Holst Engineering Ltd [2000] 77ConLR20 Ramsey J decided that the narrower approach would generally be appropriate. In doing so he not only unified the apparently inconsistent approaches taken in earlier cases but ensured the wider application of the provisions of the 1996 Act to the construction industry.
The Facts
AE&E Lentjes UK Limited ("AEE") entered into four agreements with North Midland Construction plc ("NMC"). There was a contract for enabling works and a contract for civil engineering works at each of two coal fired power stations: one at Fiddler's Ferry, Cheshire and one at Ferrybridge, West Yorkshire. The contracts were in similar terms for each of the power stations. NMC sought a finding that the provisions of the Act applied so that the four agreements were construction contracts within the Act, giving rise, in particular, to a right to adjudicate under s.108 of the Act. AEE contended that the works were not construction operations within the Act so that the agreements were not construction contracts and the Act did not apply.
It was not in dispute that the enabling works and the civil works at the two power stations came within the description of "construction, demolition or dismantling of buildings, structures or any works in s.105(1)(a) and (b) and the general provisions of s.105(1)(e). It was not in dispute that the relevant works were being carried out on a site where the primary activity is power generation. The issue was whether the enabling works and the civil works came within the description of assembly, installation or demolition of plant or machinery, or erection or demolition of steelwork for the purposes of supporting or providing access to plant or machinery under the exception in s. 105(2)(c)(i).
General Observations
Ramsey J made the following general observations:
- The operations described in s.105(2) can generally be brought within the description of operations in s.105(1) so that the intention was to exclude a specific operation from the more general description of operations.
- The purpose of the Act was to make improvements in the construction industry by providing both a rapid dispute resolution method and also more certain payment provisions for the construction industry. The provisions which have the effect of excluding particular operations from those provisions necessarily prevent those improvements applying to certain operations. It is to be expected that they do so for particular reasons which apply to those specific operations.
- The provisions of s.105(2)(a) to (c) are aimed at excluding certain particular operations in specific industries, but instead of saying that all operations which would otherwise be construction operations are excluded on sites where the primary activity is one of those industries, the exclusion is limited to particular operations.
- The definition of operations in s.105(2) has 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 s.105(1)(e).
- There were some indications in s.105(2) as to the meaning of "plant or machinery". In s.105(2)(d) there is a reference to the manufacture or delivery to site of materials, plant or machinery. When read with the references to components in s.105(2)(d)(i) and (iii), this suggested that the plant is capable of manufacture and delivery to site and is more in the form of components or items of plant than the whole industrial plant. This is reinforced by the reference in s.105(2)(c) to "steelwork for the purposes of supplying or providing access to plant or machinery". This was more consistent with plant and machinery being components or items of plant rather than the whole industrial plant. The legislation referred to "industrial plant" in s.105(1)(b). If the reference to plant and machinery in s.105(2)(c) were intended to refer to a wider meaning of an industrial plant then the added reference to "erection or demolition of steelwork for the purposes of supplying or providing access to plant or machinery" would have been unnecessary as it would be part of the industrial plant. There is no word such as "including" to show that the additional operations were included in the previous description. Rather it wass a reference to additional operations of a narrow and specific type.
The Broad and Narrow Approach
Ramsey J considered the following five previous decisions which had considered the application of the provision. In each case the issue was whether the particular works came within the description of "assembly, installation or demolition of plant or machinery" and considered that he had to resolve the difference in approach referred to as the narrow and wide interpretation.
- ABB Power Construction Limited v Norwest Holst Engineering Ltd [2000] 77ConLR20
- ABB Zantingh Ltd v Zedal Building Services Ltd [2001] BLR66
- Comsite Project Ltd v AAG [2003]EWHC 958 (TCC)
- Homer Burgess Ltd v Chirex (Annan) Ltd [2000] BLR124
- Palmers Ltd v ABB Power Construction Ltd [1999] BLR426
Ramsey J held that as s.105(2) had intentionally been drafted in terms of specific limited exclusions, so that a narrower approach to the construction of s.105(2) would generally be appropriate. He held that the intent of the Act was that it should generally apply to construction operations within s.105(1). The broad construction would deprive the Act of effect in many cases and would lead to a strained construction of the words "assembly, installation…of plant or machinery." On the other hand, the narrow construction would give effect to the Act by applying it only in cases where the work was assembly or installation of plant or machinery. On that basis he held that the narrow construction was to be preferred. Ramsey J reached the conclusion without considering Parliamentary material, but because the reference to steelwork in s.105(2)(c) was obscure, curious and odd he could do so. He held that such material supported the narrow approach. The reference to steelwork was intended to be a narrow exclusion and s.105(2)(c) was not intended to exclude all structural steelwork or other building or civil engineering work on the site.
Ramsey J followed the narrow interpretation of the exception in Palmers Ltd v ABB Power Construction Ltd [1999] BLR426 and that in Comsite Project Ltd v AAG [2003]EWHC 958 (TCC) instead of the broader construction in ABB Power Construction Limited v Norwest Holst Engineering Ltd [2000] 77ConLR20. He considered that on the facts in Homer Burgess, ABB v Norwest Holst and ABB v Zedal, the pipework, insulation and electrical wiring would come within the wording of the exclusions in s.105(2)(c) of the Act, even construing those provisions narrowly.
Judgment
Applying the narrow construction, Ramsey J held that neither the Enabling Works nor the Civil Works at Ferrybridge or Fiddler's Ferry fell with the definition in s.105(2)(c)(i) but were construction operations as defined in s.105(1) so that the provisions of the Act apply to the Enabling Works Contracts and the Civil Works Contracts. | 