Definition of “primary site activity” – exceptions to Construction Act

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ENGIE Fabricom v MW High Tec [2019] BLM, TCC

Facts

MW High Tech was the main contractor on a project to construct an energy from waste power plant, disposing of municipal waste by incineration, and generating power.  ENGIE Fabricom was a sub-contractor specifically designing and constructing the gasification system.  A dispute arose between the parties and ENGIE commenced an adjudication against MW High Tech.  The main contractor rejected the jurisdiction of the adjudicator on the basis that this sub-contract was not “a contract for construction operations” to which the Construction Act could apply.

The broad general definition of “contracts for construction operations” at Section 105 (1) of the Act is qualified by section 105(2) which sets out a list of exceptions from the definition.  One exception is contracts for assembling or installing plant or machinery on a site where the primary activity is power generation.  The issue therefore was what was the “primary activity” of the site where the works were being carried out.  The adjudicator ruled that the primary activity was waste disposal, and that he therefore had jurisdiction to proceed.  However, MW High Tec refused to pay out on the adjudicator’s decision and ENGIE Fabricom went to the High Court seeking summary judgment.

Held

The parties had agreed that this hearing would need only last half a day.  There were numerous authorities and Counsel on both sides went through them slowly and thoroughly.  Consequently the Judge concluded there appeared to be an arguable case that the primary activity was power generation, and therefore refused to grant ENGIE summary judgment on the point.  The case was adjourned…

Comment

There is no report of the outcome. Both parties relied heavily on arguments about the purpose of the works.  One side fluently argued that this was a power generation plant, and that the only thing you could use a gasification plant system for was to generate power.  The other side argued equally fluently that the overall purpose of the site was to dispose of waste, and the power generation was a mere incidental to that activity.

The focus of both parties on “purpose” seems to miss the point of Section 105(2), which specifically applies the “primary activity” of the site as the key test in applying the exception.  The trend of cases has been to apply Section 105(2) as narrowly as possible, to bring as many construction activities within the definition of “contracts for construction operations” as possible.  See for example Conor Engineering Limited v Les Constructions Industrielles de la Mediterranee SA. [2004] EWHC 899 (TCC).  Also North Midland Construction v Lentjes [2009] BLR 574.   Unfortunately the statutory test is difficult to apply and much depends upon the attitude of the individual judge in the case.

The parties had agreed that the enforcement application only needed a half day hearing, which was insufficient. If they had been more patient, a CPR8 hearing could have been arranged, and the issue properly resolved.  In the long run this would have been quicker.

For more specialist legal advice contact our Construction & Engineering team.