What is a ‘Construction Contract’?
Posted: 10th April 2014
In a decision which helps to define the legal concept of a ‘construction contract’, the High Court has dismissed an attack on the jurisdiction of an adjudicator who awarded more than £800,000 to a subcontractor engaged in fabricating and installing pipe-work for a biomass combined heat and power plant.
The plant was designed to provide power for a paper mill in Scotland. Following a falling out between the subcontractor and the main site contractor, the former had referred to an adjudicator issues in respect of the growth in the scope of the project and entitlement to extension of time and prolongation costs. The sub-contractor was awarded £808,123 plus VAT and the costs of the adjudication.
The subcontract did not contain any provision for adjudication. However, the subcontractor argued that the agreement was a ‘construction contract’ and that jurisdiction was conferred on the adjudicator by Section 108(5) of the Housing Grants, Construction and Regeneration Act 1996.
The contractor countered with arguments that the subcontract entailed work of assembly and installation of plant on a site where the primary activity was power generation. On that basis, it was submitted that the agreement fell within the exception contained within Section 105(2) of the Act and could thus not be viewed as a construction contract.
In entering summary judgment for the subcontractor and and opening the way for enforcement of the adjudicator’s award, the Court noted that the biomass plant was designed as a replacement for a coal and gas-fired plant which had served the paper mill for 60 years. The proprietors of the paper mill owned the freehold of the site and the primary activity carried out thereon was paper production, not power generation. On that basis the Section 105(2) exception did not apply.
The contractor’s arguments that the adjudicator’s decision was fatally flawed by inconsistency also failed, as did submissions that the adjudicator’s appointment under the scheme for construction contracts which applied to England and Wales was invalid, because the plant was located in Scotland.