North Midland Construction Plc v AE & E Lentjes UK Limited (formerly Lentjes UK Limited formerly Lurgi (UK) Limited)
Case reference:
[2009] EWHC 1371 (TCC)
Thursday, 18 June 2009
Key terms: Declarations - s105 - Construction operations
Lentjes was engaged to provide flue gas desulphurisation units to 2 coal fired power stations. Lentjes then entered into four agreements with North Midlands: one for enabling works and one for civil engineering works, for each of the two power stations. The contracts were contained in four purchase orders which were materially the same form consisting of a purchase order agreement which incorporated conditions of contract. North Midland sought a Part 8 Declaration from the Court as to whether the Act applied to the contracts.
Lentjes contended that the works were not construction operations within the Act so that the agreements would not be construction contracts and the Act would not apply. Specifically, Lentjes relied on the earlier case of ABB v Norwest Holst which held that on a site which was shown to be for the purpose of one of the exempted operations, then all works and contracts associated with that site would be similarly exempt.
North Midland, however, relied upon the case of Palmers v ABB which held that a narrower interpretation of s105(2) was to be preferred. In this case, where an overall site is for the purpose of one of the exempted operations, each individual contract is to be evaluated on the works performed under that contract.
The Judge decided that the enabling works and civil engineering works clearly were within the definition of "construction operations" in s105(1) but then had to decide if they were covered by the exception in s105(2)(c)(i) relating to nuclear processing and power generation.
The Judge held that the intention of the Act was to capture a wide range of work carried out in the construction industry, but with some limited specific exclusions. He concluded therefore, that, following Palmers v ABB, the narrower approach would be more appropriate.
On the facts, the works concerned enabling and general civil engineering works which were construction operations which were not excluded. This was simply because those works were not "assembly" or "installation" of "plant or machinery" under s105(2)(c).
As a result the contracts were for the carrying out of construction operations as defined in s105(1) and the Act applied.
Lentjes contended that the works were not construction operations within the Act so that the agreements would not be construction contracts and the Act would not apply. Specifically, Lentjes relied on the earlier case of ABB v Norwest Holst which held that on a site which was shown to be for the purpose of one of the exempted operations, then all works and contracts associated with that site would be similarly exempt.
North Midland, however, relied upon the case of Palmers v ABB which held that a narrower interpretation of s105(2) was to be preferred. In this case, where an overall site is for the purpose of one of the exempted operations, each individual contract is to be evaluated on the works performed under that contract.
The Judge decided that the enabling works and civil engineering works clearly were within the definition of "construction operations" in s105(1) but then had to decide if they were covered by the exception in s105(2)(c)(i) relating to nuclear processing and power generation.
The Judge held that the intention of the Act was to capture a wide range of work carried out in the construction industry, but with some limited specific exclusions. He concluded therefore, that, following Palmers v ABB, the narrower approach would be more appropriate.
On the facts, the works concerned enabling and general civil engineering works which were construction operations which were not excluded. This was simply because those works were not "assembly" or "installation" of "plant or machinery" under s105(2)(c).
As a result the contracts were for the carrying out of construction operations as defined in s105(1) and the Act applied.