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England and Wales High Court (Technology and Construction Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> North Midland Construction Plc v A E & E Lentjes UK Ltd [2009] EWHC 1371 (TCC) (18 June 2009) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2009/1371.html Cite as: [2009] EWHC 1371 (TCC), [2009] CILL 2736, [2009] BLR 574, 126 Con LR 213 |
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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NORTH MIDLAND CONSTRUCTION PLC |
Claimant |
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- and - |
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A E & E LENTJES UK LIMITED (FORMERLY LENTJES UK LIMITED FORMERLY LURGI (UK) LIMITED) |
Defendant |
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Stephen Furst QC (instructed by Pinsent Masons) for the Defendant
Hearing date: 18 May 2009
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Crown Copyright ©
The Hon. Mr. Justice Ramsey:
Introduction
Background
"1) Temporary Fencing and Gates to secure the site.
2) Temporary wheel wash plant.
3) Construction of temporary roads, hard standings and footways.
4) Construction of a car park adjacent the site huts to serve site personnel.
5) Installation of temporary services to site accommodation.
6) Construction of foundations and ancillaries for AE&E site offices.
7) Construction of temporary site drainage.
8) Demolition of existing concrete surface /(crush/re-use).
9) Contractors Preliminaries.
10) Risk assessment/Method Statement."
"8) Existing earth mound needs to be removed and shall be placed near the existing fence, designed as final noise protection embankment.
9) Demolition of existing small Buildings.
10) Demolition of existing Workshop Buildings."
"Site Mobilisation
Demolition
Excavation and Earthwork
Piling Works
Piling Load Testing
Foundation Earthing
Concrete and Reinforcement Work
Grouting of Embedded (sic)
Cleaning of construction site
Detail Engineering
Measuring of Anchor Positions and Buildings."
"that the works carried out by NMC at Ferrybridge and Fiddler's Ferry
(a) do not fall within the definition at s.105(2)(c) of the Act, namely: the 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;
(b) are "construction operations" as defined at s 105 of the Act notwithstanding that the aforesaid work may be carried out on a site where the primary activity is power generation."
"that upon the true construction of each of the Agreements for civil works that:
(a) NMC was not responsible for the design of the foundation earth bonding;
(b) AEE instructed a change to the works when issuing its for construction Concrete Form Work plans giving details of the foundation earth bonding."
The applicability of the Act
"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) nuclear processing, power generation or water or effluent treatment or…."
General observations
Previous decisions on s.105(2)(c)
"In these circumstances I am of the opinion that the adjudicator did fall into error in his construction of the word "plant". Having regard to the general description of the pipework in question as forming the links between various pieces of machinery or equipment, by which ingredients and pharmaceuticals in process of manufacture are conveyed from one stage of the manufacturing process to another, I am of the opinion that the pipework was clearly part of the plant being assembled or installed on the defenders' site. Without such pipework, the individual pieces of the machinery or equipment would be unable to operate. The pipework is in a real sense part of the apparatus which, once installed, the defenders were going to use in order to carry on their business of manufacturing pharmaceuticals ."
"…the evidence is that the provision of insulation is an integral part of the construction of pipework, boilers and the like which are required so that power may be generated. Hence if the test were: Does the installation of insulation perform a plant-like function? then the answer is undoubtedly: Yes. Without insulation the pipework, boilers etc would not function as they are designed to perform, nor could the plant be operated safely and efficiently. I entirely agree with Lord Macfadyen's approach. In my judgment any work that would be a construction operation within section 105(1) which is necessary for the full and proper assembly or installation of plant so that it will fulfil the purpose or purposes for which it is intended is exempt by reason of section 105(2)(c) (assuming that the condition relating to the site is also satisfied)."
"The drum of cable on the floor is just a piece of material. When the cable is worked into the plant or even joins two pieces of plant it becomes part of the plant and is properly referred to as plant. Similarly, a screw is just a screw when it is in an engineer's pocket, but it becomes part of the plant when he screws it into the generator. In keeping with the sense of the earlier authorities to which I have referred, it seems to me that one cannot make sense of the Act by a minute analysis of the work to see what was plant and what was not. One must look at the nature of the work broadly. Adjudication cannot be divided in its jurisdiction between minute parts of a subcontractor's work. Looking at the work overall, and regardless of any disputes about the ambit or nature of that work, I have no doubt that Zedal were employed to install plant. "
"Comsite's case is that the work scope of the Building Services sub-contract did not amount to installation of plant, within s.105, because the installation of the services to be undertaken pursuant to that sub-contract was not connected with the dryer plant but was related to the building. AAG's case essentially is that the work was integral to the plant by reason of the unchallenged evidence of Herr Umdasch that, without the lighting and the fire and gas alarms, the dryer plant could not be run because Southern Water would be prohibited by statute from running it."
"The electrical services in question appear to be those needed to run the lighting and power for the building, not the plant. They are not physically connected to the plant. There is no suggestion by AAG that any other services (eg ventilation, gas or fire alarms or heating) installed under the Building Services sub-contract related to the plant.
I conclude that the services which Comsite were to install under the Building Services sub-contract were physically integral to the building but not integral to the plant."
"In my judgment, a broad categorisation of that sort does not assist AAG. If it be appropriate to consider whether the services are required for operational purposes for the dewatering and drying plant, then that must in my judgment refer to something more than being able lawfully to operate the plant. There would have to be sufficient operational or engineering nexus that the plant would not be capable of operating without the services. That is not the case here. It is relevant to look for the physical connection found in Homer Burgess, ie those elements needed to enable the plant physically to function, not those elements without which an operator may not lawfully operate the plant."
The broad or narrow approach
Previous decisions
"31…Not all processes involved in the construction or erection of power generation plant are excluded from the ambit of subsection 105(1) by subsection 105(2). Clearly the erection of supporting steelwork is excluded. However the construction of buildings and concrete foundations for use with the plant in question do not come within the exclusion provided by subsection 105(2) nor does any painting of the internal or external surfaces of that plant.
32. Thus, it is perfectly possible, and within the statutory scheme, for a contractor's operations to fall outside the definition of a construction operation yet for a sub-contractor providing building, foundation or painting for that contractor's work to come within the definition."
"Similarly it is in my judgment clear from the language used in section 105(2) that it was intended that, if the regimes were not to apply, it would be invidious if they applied to some but not all construction contracts on a site or for a project. Defining the exempt construction operations by reference to the nature of the project or by reference to a site should minimise the possibility that, for example, one contractor or subcontractor would think that it was better or worse off than another working alongside it, or preceding or following it. That would not be conducive to the purpose of the legislation and would be inimical to the establishment or maintenance of harmonious working relationships and the concept of teamwork. Section 105(2) plainly reflects the fact that the majority of construction work done for the purposes set in paragraphs (a) to (d) is carried out by contractors responsible for design or performance and for owners or employers most of whom take an active interest in seeing that every aspect of the project should properly be planned and co-ordinated. Such involvement minimises the incidence of disputes at every level or tier. The object of this sub-section is therefore that all the construction operations necessary to achieve the aims or purposes of the owner or of the principal contractors (as described in it) would be exempt. If these approaches are correct then an interpretation should be given to section 105(2) which would further and not thwart them."
"It would not in my view make sense if, for example, a sub-contractor providing paint systems or cathodic protection systems necessary to protect plant against erosion or corrosion, to take two instances, were not exempt whereas only the basic installation (whatever that might mean) of the plant itself were exempt. Where would the line be drawn? The Act has to be applied by people within the construction industry. It should be read and construed on the assumption that the answer is clear to a layman. In addition as I have already set out, to make fine distinctions of this kind would be likely to inhibit the uniform management of contractors working alongside each other on the same site or for the same project and would not be consistent with the overall purpose of the exemptions in section 105(2) which are defined by reference to the nature or aims of those responsible for promoting or implementing the scheme, project or activity, rather than by reference to the many individual construction operations required for the drilling for or extraction of oil: for the extraction of minerals; for the assembly or installation of plant ( eg tracks, foundations and other preparatory operations for assembly or installation of plant or machinery, cranage, staging, control systems and accommodation for controllers, testing and commissioning and the like). The Act calls for distinctions which are based on operational or engineering considerations. Plant and machinery can readily be distinguished from factory roads, administrative offices etc; steelwork is exempt only if required for the purposes of supporting or providing access to plant or machinery."
"This can give rise to difficulty where the main contractor's work may fall within one of the exclusions in s105(2) of the Act whereas a subcontractor, being only concerned with a small part of the overall works, may be carrying out a construction operation within s.105(1) of the Act: Compare the approach in Palmers Ltd v ABB Power Construction Ltd (1999) 68 Con.L.R. 52 with the approach in ABB Power Construction Ltd v Norwest Holst Engineering [2001] T.C.L.R. 831. In the first case, H.H.J. Thornton Q.C. held that it was possible for a contractor's operations to fall outside the Act but for his sub-contractor's operations to fall within the Act. In the second, H.H.J. LLoyd Q.C. held that the object of s.105(2)(a)-(d) is "that all the construction operations necessary to achieve the aims or purposes of the owner or of the principal contractors (as described therein) would be exempt", including subcontractors."
"However, it is generally known that a limited number of contracting organisations representing specific sections of the construction and engineering industry persuaded the Government to exclude the contracts of their members from the ambit of the [Act]. This was because these sections of the construction and engineering industry were already operating satisfactory contractual arrangements concerned with payment. This is the explanation for section 105(2) of the Act."
"Accordingly not only must it be assumed that the Act was carefully drawn up but it is also plain that great care was taken in selecting the construction operations that were to be exempt and in defining the circumstances where they might be found. Parliament and the Ministers responsible were informed by the discussions prior to the relevant sections (or clauses) being presented to Parliament, by consultations within the industry, sections of which must have had compelling arguments for exemption, and above all, no doubt, by the enquiries and soundings by the Department of the Environment (as it then was known) which had unrivalled knowledge of the construction industry. A most thorough investigation was evidently carried out for otherwise the Government and Parliament could not have been convinced that certain sectors of the construction industry were already so well organised that no regulation of any of their contracts or sub-contracts (at whatever level or tier) was needed. Indeed one cannot but be impressed by the detail of the work done, presumably by officials by the DOE: drilling for oil and gas is excluded but drilling for water (even if it is ultimately to be treated) is not; a project for tunnelling to lay a sewer (even if it is going to a sewage works) or to construct a railway has to be regulated but not a project requiring a tunnel for minerals; installing plant for nuclear processing, and power generation, or for water and effluent treatment is excluded but not plant for an incinerator. The wide immunity given to work in, for example, the water, oil and gas industries must be seen as a tribute to them (and for all who carry out construction work for them) either for the absence of malaises which had been found to bedevil others, such as the prelevance of disputes and the presence of "pay when paid" clauses, or for the fact that the reforms required by the Act were not needed or had been carried out as Judge Thornton recorded in paragraph 29 of his judgement in ABB V Palmer ."
Discussion
"My noble friend Lord Ullswater is right to say that process engineering is totally different from construction. Process engineering is industrial work involving certain types of chemical, physical or biological processes. Examples include refining oil, generating electricity, and making chocolate. This clearly involves a great deal of heavy plant and machinery, with complicated steelwork to hold it all in place. It is only the construction of such plant, machinery and steelwork which the Bill excludes. The construction of buildings on the same site would be covered by the Bill."
....
I re-emphasise that the exemption here would apply only to work on plant, machinery or steelwork, and not to site work or building. So much of the construction sector's interest in process engineering would be covered by the new provisions."
"At Report stage I said that we were looking again at the introduction of Clause 104 (2)(c) to make sure that the right line was drawn between process engineering and other types of construction activity. Although that process will not be complete until we are in a position to lay amendments in another place, I am now able to give the House some clear assurances. In view of the amount of time that your Lordships have spent on this in debate, I should like to spend a few moments explaining our intentions.
First, on steelwork, which is the subject of Amendments Nos. 8 and 9, the arguments of noble Lords opposite have not convinced us that all steelwork on a process engineering site should be subject to the provisions of the Bill. However, we believe it is possible to distinguish between steelwork which is directly and necessarily connected to plant and machinery--steelwork, which forms, if you like, an integral part of the machinery--and other steelwork on the same site. We intend to bring forward an amendment which places integral steelwork squarely within the process engineering exclusion, but which would leave the remainder subject to Part II. Steelwork in a factory roof, a canteen or a visitor centre--just to take a few examples--would then be covered by the main provisions of the Bill.
…
To reiterate and summarise our position, it is not, and never has been, our intention to exclude from the Bill all construction work on a process engineering site. We wish to exclude work only on plant, machinery and such steelwork as is necessarily connected to plant and machinery. Ordinary civil and building work would not be excluded."
"The amendment is designed to remove any confusion that may have arisen from the existing wording of subsection (2)(c). I want to make it clear that we do not intend all work on a process engineering site to be excluded from fair contracts provision. We want to exclude only work on the machinery and plant that is highly specific to the process industry, together with work on steel work that is so intimately associated with that plant and machinery that it could not possibly be reasonably considered apart. To that end, we have made it clear that the steel work mentioned in the exclusion is only that which relates to support and access. We have also removed the word "construction" in association with plant and machinery because we found that it caused much confusion. Instead, we have decided to use the word "assembly". Both those changes were suggested in another place and we have been happy to take them forward. I repeat that all normal construction activities on a process engineering site will be subject to the provisions of the Bill. That includes building roads, erecting fences, laying foundations, and building offices or factories — even if they are made of steel. Amendment No. 127 makes that absolutely clear."
"Amendment No. 71 is another old favourite… let me just remind the House that, at the end of our consideration we undertook to amend Clause 104(2)(c) to achieve two particular effects. The first of these was to ensure that the exclusion of work on plant and machinery on a process plant site should extend only to steelwork that was necessarily connected to it in some way, and that all other steelwork on such a site--in common with all other construction work--should be subject to the Bill's provisions. The second was to remove the word "construction" from the beginning of the paragraph and to replace it with something less likely to cause confusion. I hope the House will agree that both those ends have been served by Amendment No. 71."
"Section 105 refers to assembly and installation of plant and machinery, in the context of a site where water treatment is the primary activity. Here, while the primary activity within the building is water treatment, the plant (to which the section applies) is a distinct element within the building. The fact that water treatment is the primary activity within the building does not have the consequence that all work within or related to the building housing the plant falls within the definition of plant."
The Enabling Works
The Civil Works
"The Scope of civil works is described in the following and will include all manufacturing, delivery, construction and installation of the below mentioned buildings and structures.
In general there will be built all constructions that are necessary for the installation of the equipment of the new FGD.
The main part of the civil construction are the concrete/reinforced concrete works including the associated earth-works and piling works where necessary. The structural steel work is not part of the civil works and will be tendered separately."
The earth bonding declaration
(1) Ring Earth embedded in Concrete/Galvanised Steel 40x5mm (>200mm2)/Meshed Network Connection in Concrete to be attached to Reinforcement every 2 Meters for Connection to Ring Electrode/Earth meshed Network;
(2) Bonding point/ non-ferrous in acc. with BS 6651; figure 7 or equivalent;
(3) Connections inside Concrete by Earth Rod Clamp, Compression Connectors or welded Connections.
Design Responsibility
The change
(1) That, as set out in Mr Westlake's witness statement at paragraph 24, NMC's obligations were to supply earth rods in trenches and that the change explained in paragraph 25 was that the reinforcement was to be embedded in concrete and was to be attached to reinforcement every 2 metres;(2) That there was a change in earthing rods from copper to galvanised steel on the drawing but in discussion it was changed back to copper and then because of non-availability of materials, it was changed to 50x6mm copper tape (paragraph 26 of Mr Westlake's witness statement and exhibit Pf-kW7);
(3) That the copper tape had to be clamped to the reinforcement by drilling the tape and making a U-bolt connection. It was this which is relied on as making NMC's work more difficult and caused additional cost (paragraphs 27 and 28 of Mr Westlake's witness statement);
(4) That, as mentioned in submissions, the plans required compliance with a new specification FF-0126-NU-TS-003-LUK.
Summary