| Date | 21 February 2001 |
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| Judgment | Various |
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| The Issue | Determining which construction operations are excluded by Section 105(2) of the Construction Act. |
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| Implication |
When determining whether any activity is excluded by Section 105(2), both the activity itself and the site as a whole must be caught within the excluded definitions. |
printSection 105 of the Construction Act has caused some difficulty in interpretation. Section 105(1) of the Act defines in considerable details the term "construction operations", for which the provisions of the Act apply. Section 105(2) then goes on to exclude certain operations, such as (a) drilling for or extraction of oil or natural gas, (b) extraction of minerals and (c) assembly, installation or demolition of plant or machinery, or erection or demolition of steel work to support or provide access to plant or machinery, on a site where the primary activity is nuclear processing, power generation or water treatment. These provisions have been examined in four cases (three of which have involved the industrial contracting giant ABB), with the result being evenly split. Two of the four works were held to be construction operations and thus adjudication allowed to proceed, whereas in the two other cases, the works were held to be exempt operations, for which there could be no adjudication. The first of these cases was heard on 6 August 1999 between Palmers Ltd and ABB Power Construction Ltd. Palmers had entered into a sub-contract to provide scaffolding works for ABB. ABB's work involved the assembly and erection of a heat recovery steam generator boiler, which was part of a power generation plant being installed at the Esso Foley project near Southampton. Whilst it was accepted that ABB's work fell within the exclusions under Section 105(2), Judge Anthony Thornton QC was clear that it did not automatically follow that the sub-contract for scaffolding works would also be excluded. The words of the Act were to be given their natural meaning in their context. Palmers scaffolding operations constituted "construction operations" for the purpose of Section 105(1) of the Act and they would be entitled to an adjudication of their dispute with ABB. In November 1999, similar issues arose in the case of Homer Burgess Ltd -v- Chirex (Annan) Ltd in the Outer House of the Court of Session in Scotland. It was held that pipework being carried out ancillary to manufacturing equipment was "plant" within the meaning of Section 105(2) and that since this work was being carried out at a building site intended for the production, processing of bulk storage of pharmaceuticals, the works were excluded operations. Accordingly, the majority of the issues decided by the adjudicator had been decided without jurisdiction, and could not be enforced. In August 2000, Section 105(2) was once again examined in the case of ABB Power Construction Ltd -v- Norwest Holst Engineering. ABB was the main contractor for three heat recovery steam generators, as part of a project to extend the existing power station at Peterhead in Aberdeen. Norwest entered into a sub-contract for the prefabrication and installation of the insulation to pipework, drums and various parts of the equipment. His Honour Judge Humphrey Lloyd QC agreed with ABB that the insulation or cladding of boilers, ducting, silencers and pipework formed a necessary part of the plant itself. Judge Lloyd held that exempt construction operations under Section 105(2) should be defined by reference to the nature or areas of those responsible for promoting or implementing the project, rather than by reference to the many individual construction operations required. The sub-contract therefore fell within the definition of exclusions and Norwest Holst were not entitled to an adjudication of their disputes with ABB. In December 2000, His Honour Judge Bowsher QC provided careful analysis of Section 105(2) in the case of ABB Zantingh Ltd -v- Zedal Building Services Ltd. ABB were sub-contractors for the design, build and maintenance of stand-by power generation units at two printing factories for the Mirror Group. Zedal were sub sub-contractors for the supply, installation, labelling, termination and testing of all field wiring to the generators. These were not minor generators. It was said that the two generation sites together would have a combined power capacity to meet the day-time off-peak needs of a town the size of Cheltenham. Judge Bowsher split the relevant part of Section 105(2) into four components: installation, plant, site and power generation. The project was for power generation and that much was not in issue. It was also clear that Zedal were responsible for installation works. As to whether the works were 'plant', Judge Bowsher was clear that when a cable was worked into the plant, or even simply joined two pieces of plant, it became part of the plant and would properly be referred to as plant. Thus, in carrying out wiring connections, Zedal, for the purposes of the Act, were employed to install plant. The most important element was the site of the works. In both cases the site for the construction of the standby generators was surrounded by a security fence, and contained within land owned by the Mirror Group. If the site was taken to be the whole area occupied by the Mirror Group, then it could not conceivably be said that the primary activity of those sites was power generation. The power generating units were being installed simply to serve the adjacent printing facilities. Judge Bowsher concluded that when Parliament referred 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 at the nature of the whole site and ask what is the primary purpose of the whole site. In this case, that primary purpose was printing and accordingly the work of Zedal did not fall within any exception provided by Section 105(2) of the Act. The adjudication would be able to proceed.
CJ-0107
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