Does the HGCRA apply?

Ever since the Housing Grants, Construction and Regeneration Act (the “Act”) came into force in 1998, the Courts have needed to consider what contracts, concerning what works, are covered by its provisions. In the early days, there were regular updates provided in the case law about, primarily, what were ‘construction operations’ as well as the ambits of the various exclusions. As Katherine Butler and Ava Solouk explain, it was, therefore, somewhat of a novelty that two cases, in close succession at the end of 2023, required the Courts to, once again, establish the boundaries of the Act.

In Crystal Electronics Ltd v Digital Mobile Spectrum Ltd,[1] HH Judge Keyser KC revisited what are considered ‘construction contracts’ and ‘construction operations’, whereas HH Judge Stephen Davies was called on to decide where England, as a matter of fact, ends in Van Elle Ltd v Keynvor Morlift Ltd.[2]

Both of these cases relate to the enforcement of an adjudicator’s decision. In the event that the Act did not apply, the adjudicator would have lacked jurisdiction and their award would be a nullity.

Relevant requirements of the Act

 Under s.104(2), construction contracts include agreements:

“(a) to do architectural, design, or surveying work, or

(b) to provide advice on building, engineering, interior or exterior decoration or on the laying-out of landscape in relation to construction operations”

Under s.104(6)(b), the provisions of the Act apply to construction contracts that “relate to the carrying out of construction operations in England, Wales or Scotland”.

‘Construction operations’ are defined in s.105(1) and, insofar as they are relevant to the cases considered here, include:

“(a) construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not);

(b) construction, alteration, repair, maintenance, extension, demolition or dismantling of any works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, electronic communications apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence;

(c) installation in any building or structure of fittings forming part of the land, including (without prejudice to the foregoing) systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems;

…

(e) operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this subsection, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works”.

Established parameters of the Act

 The table below offers (very much non-exhaustive) examples of previous case law that has interpreted and contextualised the requirements of the Act:

Crystal Electronics Ltd (“CEL”) v Digital Mobile Spectrum Ltd (“DMSL”)

CEL brought an action to enforce two smash and grab adjudication decisions. This was challenged by DMSL on the grounds that the contract between them was not a construction contract because the works involved did not constitute ‘construction operations’ for the purposes of s.105 of the Act.

DMSL is a joint venture between four UK mobile network operators, working together to carry out “remedial intervention services” concerning the detrimental effect of 4G mobile broadband services on digital terrestrial television reception. DMSL engaged CEL to assist customers through fitting filters or signal amplifiers to television sets and, in some cases, replacing aerials on roofs (the “Works”).

CEL submitted that s.105(1)(b), read with the relevant provisions of the Communications Act 2003, clearly stated that works concerning the apparatus for use in connection with a digital television network were construction operations. HHJ Keyser KC agreed with this submission; however, s.105(1)(b) also requires the apparatus to form part of the land. HHJ Keyser KC quickly established that television sets were patently not items of apparatus forming part of the land. The judge then turned to whether the aerials that CEL replaced did form part of the land. The judge held that aerials were “pieces of replaceable equipment, easily installed and removed, which were usually attached to the buildings by means of a secure form of strapping and were in no sense integrated into the buildings”.[3] Therefore, they too were not apparatus that formed part of the land, and thus, the Works did not constitute construction operations.

CEL also argued that if the Works were not within the scope of s.105, they fell within the scope of s.104(2), regarding the carrying out of surveying work and/or providing engineering advice in relation to the television aerials in question. This argument was similarly dismissed on the basis that, for works to fall within the scope of s.104(2), they must be activities in relation to ‘construction operations’, and the surveying work relied upon must be “land and building surveying, such as is done by surveyors in the construction industry”.[4] The surveys conducted by CEL were merely observational tasks which consisted of looking at the aerials on the outside of the customer’s property and, once inside, their television equipment. The judge held that CEL’s Works did not amount to surveying, nor did they relate to construction operations.

Accordingly, the contract between the parties was not covered by the Act, and the adjudicator therefore had no jurisdiction to determine the dispute. The decision could not, therefore, be enforced.

Van Elle Ltd (“VEL) v Keynvor Morlift Ltd (“KML”)

VEL sought to enforce an adjudicator’s decision which awarded it the sum of £335,142.33 from KML, being the true valuation of its entitlement under the contract made between them. VEL was engaged to replace existing pontoon berthing and mooring piles at Fowey Harbour in Cornwall (the “Works”). The Fowey Harbour is located inland of the point where the River Fowey meets the sea. The pontoons are connected by a hinged ramp, with one being connected to the riverside sea wall by a gangway. The mooring piles are driven into the ground, under the river, below low water level and are not connected to the pontoons.

KML opposed the application and argued that the adjudicator did not have jurisdiction. It contended that s.104(6) limits the construction operations defined in s.105 (above) to operations carried out in ‘England, Wales and Scotland’. Given that the Act does not define ‘England’, KML relied on the definition in other legislation,[5] which cross referred to the Ordnance Survey election map (the “OS Map”). The OS Map shows the Fowey boundary as running along the coastline. KML argued that, given that the pontoons and mooring piles are located within River Fowey (i.e. outside the coastline border), they are not within England.

VEL submitted that the OS Map was based on the Territorial Waters Order in Council 1964, which had been revoked by the Territorial Sea (Baselines) Order 2014 (the “2014 Order”). As an alternative definition, VEL relied on Article 8 of the United Nations Convention on the Law of the Sea (“UNCLOS”) which provides that “… waters on the landward side of the baseline of the territorial sea form part of the internal waters of the State”. The ‘baseline of the territorial sea’ effectively draws a straight line across the river’s mouth. On this basis, VEL argued, the pontoons and mooring piles sat within the internal waters, and therefore the land, of England.

S.104(6)(b) of the Act restricts its application to contracts relating to construction operations that are wholly within England, Wales and Scotland. However, the Act is intended to have broad effect. HHJ Davies, therefore, held that, relying only on the OS Map to define the boundaries of England, it would mean that “anything more than a minimal encroachment of a building, structure or works beyond the low water mark would have the effect of meaning that the whole contract would fall outside the Construction Act”.[6]

The judge held that UNCLOS was mutually consistent with the 2014 Order and that, by virtue of the Interpretation Act 1978, reference to ‘land’ in s.105(1) of the Act includes land covered by water. Accordingly, HHJ Davies decided that the works to the pontoons and mooring piles, being landward of the mouth of the River Fowley, were construction operations within England. The Act, therefore, applied and an order for the enforcement of the adjudicator’s decision was granted.

Conclusion

The above cases add to the existing jurisprudence establishing what is and what is not covered by the Act. Accordingly, we now know that:

• Television aerials do not “form part of the land” and visual observations of the same do not constitute ‘surveying works’, nor do such observations amount to ‘construction operations’; and
• Construction operations carried out on land, whether or not covered by water, within the inland waterways of England, Scotland or Wales are within the geographic ambit of the Act.

[1] [2023] EWHC 2656 (TCC)

[2] [2023] EWHC 3137 (TCC)

[3] [2023] EWHC 2656 (TCC), at paragraph 46.

[4] Ibid, at paragraph 48(2)

[5] The Interpretation Act 1978, which refers to the Local Government Act 1972

[6] [2023] EWHC 3137 (TCC), at paragraph 64