Palmers is a nationally known scaffolding contractor. ABB is a specialist contractor that assembles heavy turbine boilers and generators. Palmers is doing the scaffolding for ABB on a huge industrial plant owned by Esso in Southampton.
More about their quarrel later but first, a key issue was whether Palmers had the right to call for an adjudicator at all. ABB said the quarrel couldn’t come to one of these new-fangled referees because no one was involved in a construction contract or operation.
Let me explain something here. The Construction Act is ever so special. It is all about managing building disputes at 90 mph. It was well known that some tykes used the courts or arbitration to drag things out and cause folk to go bust, but I am not suggesting that is happening here. The new payment rules and new referee are working ever so well – in 28 days, would you believe – but they only apply to construction contracts or construction operations.
If Palmers was doing scaffolding to huge boilers and pipes, ABB said it could forget the new act. And if things such as turbines and boilers sound some distance from construction, this type of dispute certainly is not. ABB wanted to withhold large sums because, it alleged, Palmers caused delay and liquidated damages loomed large.
Presumably, ABB wanted to use the old route and meanwhile hang on to the cash. So, quick as lightning, Palmers called on the Technology and Construction Court (part of the High Court) to decide a handful of important questions. On 26 July, it sought declarations as to whether an adjudicator would have jurisdiction to deal with its monetary claim of wrongful withholding, whether it could suspend performance of the scaffolding work, and whether its interim account should be paid, seeing as the payment dates had passed. By the way, 26 July was a Monday; by Friday, they were in front of Judge Thornton. The dispute only arose on 20 July. This is breakneck pace, and all credit to the TCC for getting a move on.
If, by heaven, the court can get it done in five days, why bother with a massive 28 days?
So, what happened? Well, it is a fraction complicated. First, scaffolding is not a construction operation if that scaffolding is not for principal work that is also a construction operation. Let’s deal with that before we go on.
In popular speech, the word “construction” is usually used in connection with building works, as opposed to engineering operations. But the act does not confine itself to building; it includes work on power lines, telecommunications apparatus and industrial plant forming part of the land. A boiler and its steelwork once assembled and fixed forms part of the land and, said the judge, “it would be hard to conceive a more rigid and permanent structure than the steelwork in question”. It mattered not that the boiler was assembled elsewhere and then lifted into place. Industrial plant was within the act and this ABB work is a construction operation.
That dealt with the first point, and Palmers’ scaffold was therefore in scope. No, no, said ABB: there is another escape route. The act excludes construction operations where the site’s primary activity is already power generation. Both parties agreed that the Esso site was covered.
So, is that game, set and match to ABB? No. The judge interpreted the act to mean that scaffolding erected on exempted buildings such as a power generation site was nevertheless a construction operation. Judge Thornton was very careful about all this; he even allowed an examination of Hansard for what was said in parliament when the bill was being debated. The minister’s speech reinforced the judge’s view.
Finally, the court was willing to give declarations on two more points. ABB wanted to withhold, but to do so a special notice must first be issued. I call it the amber notice. No notice was given and no withholding was allowed, said the judge. Palmers had given a notice – the red notice, I call it – that it intended to postpone its works. The judge said that evidence had to be called on disputed facts here, so he declined to decide. “Go to the adjudicator for this,” he said.
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 paper Buildings, Temple, London EC4 7EU, or e-mail him on email@example.com