Construction Operations   © Daniel Atkinson 1999

The intention of the Housing Grants Construction and Regeneration Act 1996 was that it should cover most but not all of the construction industry. Although it is commonly thought that all construction related to the process industry is excluded form the Act, this is not the case. Even during the passage of the Bill, Lord Lucas, the minister leading for the Government during the relevant debates in the House of Lords, emphasised that it had never been the intention to exclude from the Act all construction work on a process engineering site. It was only intended to exclude work on plant and machinery, but ordinary civil and building work would not be excluded. It was therefore always anticipated that there may be "mixed" sites in which some works would be covered by the Act and others not. Indeed there is the possibility of "mixed" contracts in which only part of the work under the contract is covered.

The difficulty in identifying the exact scope of the Act is that the terms adopted in the Act to describe construction are not precisely defined. It was therefore to be expected that disputes would arise on the exact scope of the Act and the meaning of its terms. That has proved to be the case.

The first case was Palmers Limited v ABB Power Construction Limited (Aug 1999) TCC. In this case the meaning of "construction" was examined. It was held that the term had a wider connotation than the use in popular speech. The effect of the decision was to widen the scope of the Act.

The second case dealt with the meaning of "plant". In Homer Burgess Limited v Chirex (Annan) Limited (1999) Crt of Session the pursuers Homer sought enforcement of the principal sum awarded by the Adjudicator, the VAT due and interest.

It was common ground that the primary activity of the site was the production, transmission, processing or bulk storage of pharmaceuticals. It was argued that a very high proportion of the works was the assembly or installation of plant, or the erection of steelwork for the purpose of supporting or providing access to such plant. These are specific operations that are excluded from the Act on a processing site. Accordingly it was said the contract was not a construction contract since it was specifically excluded from the Act.

The adjudicator had not accepted these arguments but had taken a restrictive approach to the meaning of "plant". He decided that he had jurisdiction to deal with disputes arising from the associated pipework. This was not part of "plant" and therefore this part of the works was caught by the Act. The meaning of "plant" was referred to the Courts.

It was held that it was necessary to consider on an item-by-item basis whether a contract related to "construction operations". It was held that the word "plant" had to be given its ordinary meaning. The word "plant" included the pipework forming links between various pieces of machinery or equipment by which ingredients and pharmaceuticals in process or manufacture were conveyed from one stage of the manufacturing process to another. Without such pipework, the individual pieces of machinery or equipment would be unable to operate. It was held that the installation of such pipework on a processing site was not an operation which was caught by the Act. Accordingly the Adjudicator did not have jurisdiction to deal with disputes relating to the pipework.

The decision has the effect of reducing the scope of the Act particularly on processing sites. The test for the definition of "plant" is whether or not the particular work is necessary to allow the "plant" to operate. It will not be difficult to show that many of the ancillary operations on a processing site are outside the Act.

There is one final accept of the decision which is of interest. Having found that part of the Adjudicator's decision was outside his jurisdiction, what should the Court do with the decision?

It was accepted that part of the dispute was within the adjudicator's jurisdiction. Nonetheless it was open to the Court to regard the adjudicator's error as to the scope of his jurisdiction as undermining the validity of his decision as a whole. This was so even if there were parts of the decision that might have been made to the same effect if he had not erred as to his jurisdiction. In that case the Court could decide that the decision was a nullity.

Alternatively the Court could enforce the valid part of the award. In order to do so, the court considered whether the adjudicator was better placed to review the detail of his decision and determine which parts stood with the proper interpretation of "plant". Since there was no doubt as to the competency of the adjudicator, the matter was remitted to him. Although he was now out of time the parties would agree to an extension of time. In any event there was nothing to prevent the pursuers from making a fresh referral to adjudication.

The decision in Homer is an important decision. It emphasise that the parties and the adjudicator will need to use a "statutory blue pencil" to mark out those parts of sites and contracts which are not part of the Act. The risk otherwise is that the decision given by an adjudicator may turn out to be a nullity and unenforceable, making the process a waste of time. In addition the Courts may police adjudicator's decisions, remitting them to adjudicators to revise to take into account the Court's decision.

In Nottingham Community Housing Association Limited v Powerminster Limited (2000) TCC, it was held that