Judgement Date: 18.06.2009
Enabling and civils works for plant at a power station site were not excluded from the definition of “construction operations” by s.105(2)(c)(i) of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”) and the sub-contracts for these works were therefore subject to the provisions of the Act.
Technology and Construction Court, Mr Justice Ramsey
AE & E Lentjes UK Ltd (“AEE”) as the turnkey contractor for works to install flue gas desulphurisation plant at two coal-fired power station subcontracted the necessary enabling works and civils to North Midland Construction Plc (“NMC”).
The enabling works included erecting temporary fencing and gates, constructing temporary roads, offices and drainage, and demolishing concrete surfaces, buildings and workshops. The civils works involved excavation, piling and reinforced concrete foundations for the plant itself and for the steel structures that would support and provide access to the plant.
The sub-contracts did not include clauses providing for adjudication. A dispute arose concerning the final account. NMC wished to take advantage of the Act’s dispute resolution and payment regime in relation to the enabling and civils works. NMC therefore sought a declaration from the Court that the Act applied to the sub-contracts on the basis that the enabling and civils works were “construction operations” for the purposes of the Act. AEE argued that NMC’s works were excluded from being “construction operations”.
The Act applies to contracts concerning “construction operations”. “Construction operations” are defined at s. 105(1)(a) to (f) of the Act. This definition is subject to the various exclusions under s. 105(2), which provides “the following operations are not construction operations” and defines these in s. 105(2)(a) to (e). The Court was asked to decide whether NMC’s enabling and civils works came under the exclusions in s. 105(2)(c)(i), which provides that the following acts do not constitute “construction operations”:
“assembly, installation or demolition of plant or machinery, or erection of steelwork for the purposes of supporting or providing access to plant or machinery, on a site where the primary activity is:
(i) nuclear processing, power generation or water or effluent treatment…”.
These words had previously been interpreted in the following conflicting ways:
- A narrow interpretation is found in Palmers Ltd v ABB Power Construction Ltd  BLR 426. In Palmers the High Court found that only operations that were literally the “assembly, installation or demolition of plant or machinery” were excluded from the workings of the Act. Operations such as the construction of buildings and foundations for use with the plant or internal or external painting of the plant were not captured by the exclusion.
- A broad interpretation is found in ABB Power Construction Ltd v Norwest Holt Engineering Ltd  EWHC TCC 68. In ABB Power the High Court found that the exclusions included operations that were necessary for the plant to be properly assembled or installed or that meant the plant could fulfil its purpose (although the High Court also found that the broader interpretation did not serve to exclude works such as the construction of roads and administrative offices).
Ramsey J was asked to choose between these rival interpretations of s.105(2)(c)(i).
Ramsey J held:
- the word “plant” in s.105(2)(c)(i) relates to components or items of plant, not the whole industrial plant in its entirety.
- the narrower interpretation of the scope of the words in s.105(2)(c)(i) set out in Palmers is to be preferred to the broader interpretation in ABB Power for the following reasons; the scheme of section 105 is to set out a very wide definition of “construction operations” and then list specific exclusions. This favours the narrower interpretation of the exclusions. the broader approach requires a strained construction of the words “assembly and installation of plant or machinery”.
- on the facts of this case both the enabling works and the civils works were “construction operations” as they were merely preparatory to carrying out work on the site and could not be described as “assembly, installation or demolition of plant or machinery”.
- in the context of deciding between the broader and narrower interpretation of s. 105(2)(c), the added words “erection or demolition of steelwork for the purposes of supporting or providing access to plant or machinery” are ambiguous and obscure. Accordingly reference to Hansard could be made in order to ascertain the intention of Parliament in relation to them. The relevant passages in Hansard show that 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. This supports the narrower interpretation.
- in deciding whether work fell under the s.105(2) exclusion, the correct approach for the Court to take was to take a look at the work in the round, and not to conduct a minute analysis of each element of the work. Although there will inevitably be some grey areas, these should be resolved by looking at the works overall to decide if on a straightforward and commonsense analysis the contract is one for construction operations or excluded operations.
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