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Winners and losers in the adjudicators' generation game

legal matters

When parliament extended an invitation to the adjudication party by enacting the 1996 Construction Act, it did so with reference to a very specific guest list. S.105(1) of the act gives six closely worded definitions of the types of contract that include the statutory dispute resolution process.

S.105(2), however, went on to list five types of contract that were expressly to be denied access to an adjudicator. Thus, for example, contracts for the 'construction of buildings forming part of the land (whether permanent or not)' are in, while 'contracts for drilling for oil or natural gas' are out.

Construction works being what they are, however, it is perfectly possible to find your contract on both lists. Thus the erection of steelwork for the purposes of supporting machinery (an excluded category) could also be described as 'the construction of any works including dock, harbours and railways' (an included category).

One leading construction QC considered these provisions to be so replete with seemingly irrational distinctions that they should be put on a par with the Misrepresentation Act 1967, another much criticised piece of legislation, and condemned as being 'little short of scandalous' in the way that parliament had introduced these exclusions without giving any indication of how they should operate.

In the absence of such guidance, it has fallen to the courts to make sense of the provisions and decide who is entitled to hop on to the adjudication-go-round and who must find their dispute resolution fun elsewhere. The excluded category that has occupied more court time than most is S.105(2)(c), which includes (and I paraphrase) 'the installation of plant on a site where the primary activity is power generation'.

The key words that have troubled the courts are 'plant', 'site' and, believe it or not, 'is'. Early on the Scottish courts held that 'plant' should be given its ordinary meaning and that, for example, pipework that served a plant without which it would not operate should be included within the definition. 'Site' proved more troublesome. Large construction sites can be subdivided into smaller areas where specialist works are carried out.But should they be distinguished simply because they have a fence around them? Again the courts favoured a broad interpretation and an inquiry into the primary purpose of the site as a whole. The meaning of 'is' gave rise to 'the temporal point', the thrust of which was this: the act does not apply to contracts for the construction of, for example, a new power plant on a site where the primary activity will be power generation. It can only apply to work on sites where the power plant has already been built and is carrying out the excluded activity. The temporal point was wholeheartedly rejected as being 'an absurdity', especially as the act is applied by adjudicators who are, in the main, not lawyers.

These points were considered afresh in the recent case of Conor Engineering v CNIM SA (2.4.04). CNIM was engaged by Hampshire Waste Services to design and build a plant for the incineration of waste and the generation of electricity. Conor was its boiler and pipework subcontractor. Conor referred payment disputes to adjudication and the adjudicator found in its favour. CNIM argued that the adjudicator's decision was unenforceable because the contracts were for work carried out on a site where the primary activity was power generation and were excluded under the act.

They agreed that the site included the whole of the site, and not just the areas where Conor was working.The site had previously been used for waste disposal only, but the court agreed that the act applied equally to new projects and the activities that 'will be' carried out.

The central question was, therefore, whether the primary activity of the site was incineration of waste (which was 'in') or the production of electricity (which was 'out'). The court was impressed by just how much waste was incinerated compared with the small amount of electricity generated and concluded that the primary purpose of the plant was the incineration of waste.

Conor's subcontractors, therefore, included a statutory invitation to adjudication and the adjudicator's decision was enforceable.

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