Equitix ESI CHP (Wrexham) Limited v Bester Generacion UK Limited [2018] EWHC 177 (TCC)

This recent TCC case provides useful guidance on how the Courts will interpret excluded operations in terms of the Construction Act.

The Facts

Equitix engaged Bester Generacion to design and build a Biomass Energy Generating Plant. Work quickly fell into delay and Equitix terminated the contract issuing a certificate requiring Bester to pay £11,592,733.67.

There was a dispute about the validity of Equitix's termination and the basis/accuracy of the certificate. Equitix referred that dispute to adjudication.

The Adjudicator ordered payment to Equitix. Bester refused to pay and Equitix raised enforcement proceedings.

Bester resisted enforcement on the grounds that the contract included for works, which were expressly excluded from the Housing Grants (Construction and Regeneration) Act 1996, and therefore could not form the subject of an Adjudication.

The 1996 Act defines a construction contract as an agreement for the carrying out of construction operations. Within the act certain operations are identified which are specifically excluded from the terms of the act including:-

"assembly, installation or demolition of plant or machinery, or erection or demolition of steelwork for the purposes of supporting or providing access to plant or machinery, on a site where the primary activity is –

(i) …Power generation…”

Bester argued that, since the subject matter of the contract was power generation works, the works were excluded from the definition of construction operations. Equitrix argued that the work which had been carried out prior to termination did not fall within the definition of excluded works, in any event the subject matter of the adjudication did not relate to excluded works.

The court found that the 1996 Act specifically provides for circumstances where the work being carried out is a hybrid of construction operations and excluded operations, the definition of excluded works is narrowly defined in the act and should be interpreted in the same way. When considering whether an adjudicator has jurisdiction, the actual subject matter of the dispute should be the focus. In this dispute the subject matter was the validity of the termination and the sum due on termination. Since, at the time of termination, no excluded works had been carried out, the Adjudicator had jurisdiction to consider the dispute referred.

It is always sensible to check that a dispute relates to works which are included within the definition of construction operations in the act, before commencing adjudication. However this case underlines that it is important to look at the actual works which are the subject of the dispute and not just the general subject matter of those works to establish whether they are included or excluded from the terms of the act.