ºÃÉ«ÏÈÉúTV

Nobody could Deny that the Construction Act has changed the landscape of UK construction. Staged payments are now usually obligatory, pay-when-paid clauses have been outlawed in most cases and withholding money is only possible if the right notices are served at the right time. Also, of course, the statutory imposition of adjudication has radically changed the scenery.

However, these benefits are only available in the case of construction contracts as defined in the act. That definition has been held by the courts to exclude some contracts that the ordinary man in the street would probably call construction contracts. Equally, it includes others that he would not.

In Nottingham Community Housing Association vs Powerminster (20 June 2000), Mr Justice Dyson had to consider a maintenance contract for gas heating and cooking systems entered into by a housing association. The contractor had to inspect and service the gas appliances on an annual basis and provide a breakdown and repair service. Nottingham withheld payments from the contractor who gave notice of adjudication. Nottingham contended that the maintenance contract was not a construction contract.

According to the act, a contract under which a person carries out construction operations is a construction contract (section 104(1)). Construction operations include "the construction, alteration, repair, maintenance … of buildings, or structures forming, or to form, part of the land (whether permanent or not)" (section 105(1)a). The judge held that the maintenance and repair of gas appliances fell within this definition. His reasoning was that gas appliances formed part of the structure of the buildings in which they had been installed, just as much as demountable wall partitions or cladding panels. So the gas maintenance agreement was a construction contract. Not a conclusion that many laymen would have come to, perhaps.

In Stavely Industries vs Oderbrecht Oil and Gas Services (28 February 2001) the court was concerned with a contract for the design, procurement, supply and installation of fire, gas, electrical and telecommunications equipment in modules that were to be used as living quarters on a gas rig in the Gulf of Mexico. During the installation, the modules were placed on stands some two metres above the ground in a yard in Teesside.

Merely fixing a moveable unit so that it was more stable did not make it a fixture

Now most people would probably call that a construction contract, but Judge Havery said no. Section 105(1)c states that the installation of fittings in any building or structure is a construction operation, but only if those fittings form part of "the land" and, what is more, that land has to be within England, Wales or Scotland (section 104(6)b). Since the fittings were installed in modules which were to be fixed on rigs in the Gulf of Mexico, the contract was not a construction contract and there was no right of adjudication.

Finally, in the recent case of Gibson Lea Retail Interiors vs Makro Self Service Wholesalers (24 July 2001), the question facing the court was whether a shopfitting contract was a construction contract under the act. Gibson Lea's contract with Makro was for fitting out various stores. Some of the items supplied were chattels such as stools, mirrors and mobile stands. However, much of what the contractor undertook was the supply and fixing of islands and stands to the structure of the buildings; for example, by bolting them to the floors or walls.

Judge Seymour relied on evidence to the effect that the purpose of this fixing was to ensure that the units were stable, and not to ensure that they could not be moved. Section 105(1)c provides that the installation of fittings forming part of the land is a construction operation. But the judge found that this was only so if the fittings became a permanent part of the land; in other words, fixtures. Merely fixing a moveable unit so that it was more stable did not make it a fixture. So this contract was not a construction contract – a result that might surprise shopfitters.