Keywords: Housing Grants Construction and Regeneration Act 1996, primary activity of site, jurisdiction, Section 105

The issue in ABB Zantingh Limited v Zedal Building Services Limited (2000) TCC was the classification of the site, how was the term “primary activity” in Section 105(2)(c)(i) to be determined.

The project involved the construction of two diesel powered electricity generating stations on two sites on land owned by the Mirror Colour Print Group. MCP contracted with Scottish and Southern Energy plc for the construction of the generating sites. SSE entered into a sub-contract with ABB for the design, build and maintenance of the power generation sites. ABB entered into a sub-sub-contract with Zedal for the supply, installation, labelling, termination and testing of all field wiring including the supply and installation of certain metal containment systems and secondary steel support.

The contract was made by various letters and faxes in late 1999 but no official order was given. There was no express agreement for adjudication.

Disputes arose and on 1st August 2000 Zedal applied to the Institution of Electrical Engineers for the appointment of an adjudicator which duly occurred. ABB challenged the jurisdiction of the Adjudicator on the grounds that the construction operations carried out by Zedal were excluded from the Act by Section 105(2)(c). By agreement between the parties the adjudication proceedings were adjourned pending resolution by the court of the matter of jurisdiction.

The central issue was the primary activity of the site. MCP was not a power generating company and their principal activity was contract newspaper printing primarily for a fellow subsidiary undertaking. The generators were a temporary measure in relation to the millennium bug. The generators were of a type used for standby and it would be unusual to use the diesel generators to supply electricity to the grid. MCP had not obtained the special license required to generate power for the grid. The issue however was not the primary activity of MCP but the primary activity of the site.

His Honour Judge Bowsher Qc examined the law and referred to the decisions in Palmers Limited v ABB Power Construction Limited [1999]BLR 426 and Homer Burgess Limited v Chirex (Annan) Limited [2000]BLR 124 and ABB v Norwest Holst.

He examined the term in Section 105(2)(c)(i) “installation … of plant … on a site where the primary activity is … power generation”. It was held that Zedal had carried out some installation.

The next issue was whether Zedal’s work of installation of cables, cable trays and ladders was installation of plant for the purposes of Section 105. It was recognized that there was a difference between a drum of cable on the floor and the same cable worked into a piece of plant, or even joining one piece of plant with another. The drum of cable on the floor is just a piece of material. When the cable is worked into the plant or even joins two pieces of plant it becomes part of the plant and is properly referred to as plant. Similarly, a screw is just a screw when it is in the engineer's pocket, but it becomes part of the plant when he screws it into the generator.

It was held that one cannot make sense of the Act by a minute analysis of the work to see what was plant and what was not. One must look at the nature of the work broadly. Adjudication cannot be divided in its jurisdiction between minute parts of a sub-contractor's work. Judge Bowsher looked at the work overall, and regardless of any disputes about the ambit or nature of that work, decided that that Zedal were employed to install plant. The exception provided by section 105(2)(d) itself suggests that cables, cable trays and cable ladders may become plant when installed. The manufacture and delivery to site of such items for power supply were excepted from the operation of the Act "except under a contract which also provides for their installation". He held that in conformity with the decisions in Homer Burgess v. Chirex and ABB Power v.Norwest Holst (paragraph 15) and for the reasons there stated, that the materials used by Zedal became plant.

The central issue was therefore the classification of the site. Judge Bowsher considered that if any generator surrounded by a security fence was regarded as a "site" then every such generator would be an exception to the Act because regarded on its own it must have a "primary activity" of power generation because regarded on its own it has no other activity. This view would deprive some important words of the Act of meaning. The Act made its exception only in relation to sites where the primary activity is power generation. Clearly there is no statutory exception in relation to sites where the secondary or tertiary activity is power generation. So any construction of the Act that excludes the possibility of secondary or tertiary activities would be contrary to the intention of Parliament. Accordingly the part of the work on which ancillary power generators were being built would be one site excluded from the Act and the rest of the work would be another site to which the Act did apply. Companies and men working on the generators would be working on different terms from those working on the remainder of the site. If Zedal were employed both to work on the generators and to do work related to the main switchboard in or near the main printing works, they would be subject to the Act in one part of their works and not in another.

It was held that when Parliament refered in section 105(2) to "a site where the primary activity is..." the reference must be to a place broader than a generator surrounded by a security fence. To make any sense of the Act, one had to look to the nature of the whole site and ask what is the primary purpose of the whole site. Is the primary purpose power generation, or, in this case, printing? It was held in this case that the work did not fall within any exception provided by Section 105(2) of the Act and the declaration requested by ABB was refused and the action dismissed.