When Is A Construction Contract Not A Construction Contract?
North Midland Construction plc v A E & E Lentjes UK Ltd
This recent case centred on whether certain works carried out at
two coal fired power stations fell within the ambit of the
Construction Act. A E & E Lentjes UK Ltd
("AEE") sub-contracted certain works to North Midland
Construction plc ("NMC"). The parties entered two
contracts for each power station – one for enabling works
and one for civil works. The enabling works consisted mainly
of preparatory works, such as securing the site, constructing
temporary roads, and installing temporary services. The civil
works involved heavier construction works, such as piling,
excavation and foundation earthing. Following a dispute over
the final account, NMC wanted to exercise its statutory right to
adjudicate under the Act, which it could only do if these contracts
were held to be "construction contracts" as defined in
the Act.
The Act applies to contracts for "construction
operations". These are defined in section 105(1) and
qualified by the exceptions under section 105(2). Important in this
case, was the exception in relation to "assembly, installation
or demolition of plant or machinery...on a site where the primary
purpose is...nuclear processing, power generation, or water
effluent treatments..."
If a broad approach was taken to the definition (as had been
favoured in the earlier case of ABB v Norwest Holt Engineering
Ltd (2000) 77 ConLR 20) then any works that related to the
assembly or installation of plant or machinery for a power plant
would fall under the exclusion in section 105(2) and this dispute
would therefore be outwith the scope of the Act.
If, however, a narrow approach was taken (as it was in
Palmers Ltd v AB Power Construction Ltd [1999] BLR 426),
unless the works directly related to the assembly or installation
of plant for instance, they may not be excluded. On this
view, since NMC's works were not the assembly or installation
of the power plant or machinery, they were not excluded and the Act
would apply.
In deciding which view was to be preferred, the court looked at
the records of the parliamentary debate when the Act was being
drafted. The court held that had Parliament wanted all works
directly or indirectly linked to one of the excluded categories to
be excluded, they would have inserted a catch-all provision into
the Act. The fact that they had not done so indicated that
they had not intended the Act to be excluded in circumstances such
as...
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