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Working out what's excluded from HGCR is not always easy

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legal matters

Since the implementation of the Housing Grants, Construction and Regeneration Act, adjudication has been widely used in many construction disputes and now often springs to mind as a first resort.

But several construction-type contracts are excluded from the Act and thereby from statutory adjudication. It pays to keep to hand sections 104 to 106 of the Act and the Exclusion Order.

Even then, it may not be clear whether your contract is inside the Act or not.

Several cases have now occurred that deal with inside/outside the Act arguments. Section 105 in particular has provided fertile ground. It defines the meaning of 'construction operations' and is long and detailed. Much of the difficulty with section 105 is that 105(1) describes what constitutes a construction operation, but some of the activities thereby included are then expressly excluded by 105(2), thanks to lobbying by various parts of the industry when the legislation was drafted. One judge has described the section as 'somewhat convoluted'.

Easier to follow are the section 106 exclusion of residential occupier contracts, and the Exclusion Order - this excludes, for example, agreements under section 106 of the Town and Country Planning Act and Private Finance Initiative projects. Perhaps less clear cut is what is encompassed by finance and development agreements, both excluded by the Order.

In Nottingham Community Housing Association v Powerminster (June 2000), the court decided that maintenance work to domestic heating systems was a construction operation falling within section 105(1), hence the adjudication provisions applied.

More exotic facts were addressed in Staveley Industries v Odebrecht (February 2001), concerning a contract for providing servicing systems to modules constructed in a yard next to the River Tees, which were to be installed as living quarters on a rig in the Gulf of Mexico.

The Act applies to construction operations in England, Wales or Scotland (section 104) that deal with structures that form or are to form part of the land (section 105(1)). Having rejected the argument that the modules formed part of the land while in the Teesside yard, the court found that the rig, being founded below the low water mark, was not a structure forming part of the land. It followed that the contract works were not a construction operation under the Act.

In Palmers v ABB Power Construction [August 1999], it was argued that a scaffolding contract that enabled a boiler to be assembled and erected was not a construction contract under the Act. Section 105(2) excludes as a construction operation the assembly of plant and steelwork on sites where power generation is the primary purpose, as on this site.However, the court found that the scaffolding contract was a construction operation in its own right for the purposes of the Act. There was a different answer in ABB Power Construction v Norwest Holst Engineering (August 2000), when the court held that the 105(2) exclusion for power generation sites meant that a contract to provide insulation to pipework on such a site was not a construction operation.

Similarly, the installation of pipework at a pharmaceutical plant was not a construction operation as it fell within the section 105(2) exclusion for pharmaceutical sites (Homer Burgess v Chirex , November 1999). However, a contract for wiring to electricity generating stations was held to be a construction operation in ABB Zantingh v Zedal [December 2000].The judge looked further than the fenced-off generator area to the whole site, a printing works, and concluded that as printing was the primary site activity the contract was within the Act.

Although it is tempting to alight on the facts of these cases and categorise them as 'yes' and 'no' answers, the underlying arguments are not straightforward. If there is doubt, there is a risk that enforcement of an adjudicator's decision will be refused because the Act does not apply.

The adjudicator cannot decide his own jurisdiction, but you can ask the court to rule on the applicability of the Act at the outset. And in the spirit of adjudication, the court has sought to deal with such applications quickly - for example, Palmers v ABB took 11 days from issue of proceedings to final judgment.

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