North Midland Construction plc v A E & E Lentjes UK Ltd [2009] EWHC 1371 (TCC)

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 this case. As such, the court held that the narrow approach was to be preferred. The Act therefore applied to the sub-contracts and NMC were entitled to adjudicate.

The case is an important reminder to parties entering a contract for construction works to consider whether the Act will in fact apply. If there is doubt, parties can consider drafting in a contractual Adjudication process rather than relying on the Act.

The case can be viewed at: http://www.bailii.org/ew/cases/EWHC/TCC/2009/1371.html